F&G Life being sold by St. Paul

London-based Old Mutual PLC paying $635 million

No move is planned

All 170 workers on Fleet St. expected to keep their jobs

April 27, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

The St. Paul Cos. announced yesterday that a subsidiary has signed a definitive agreement to sell Baltimore-based Fidelity & Guaranty Life Insurance Co. for $635 million in cash and stock.

Old Mutual PLC, a growing London-based international financial services company, expects to complete the acquisition of F&G Life this fall.

F&G Life sells products that include life insurance and annuities. Executives said it will remain based in Baltimore, where it employs about 170 workers at its offices on Fleet Street. Employees, who are financial, actuarial and marketing professionals, will retain their jobs.

"It should do well for us," said Guy V. Barker, chief executive officer of Boston-based Old Mutual U.S. Life Holdings Inc. "No reason at all to move out of Baltimore. I don't see there is any need to do trimming."

Harry N. Stout, president of F&G Life, will remain in that position as well as serve as deputy CEO of Old Mutual U.S. Life Holdings.

St. Paul acquired F&G Life in April 1998, when it bought its parent, USF&G Corp., for $3.7 billion.

At the time the deal was announced in January 1998, USF&G employed 2,800 workers in Baltimore and 6,100 nationwide. St. Paul continues to employ about 1,000 workers at its Mount Washington campus.

"Our commitment to Baltimore is unchanged," said David Monfried, a spokesman for the St. Paul, Minn.-based company, which writes commercial property liability insurance. "We are a growing company. We really like our Baltimore operation; we have got great talent there."

St. Paul has been transforming itself into an insurance company focused on specialty insurance markets.

It is the world's largest medical malpractice insurer. It insures technology businesses and companies with operations online, and it operates a surety underwriting business in Baltimore that provides performance bonds to guarantee the work of contractors on construction projects.

Two years ago, it sold its personal lines business, which insured homes and autos. Last year, it sold a unit that insured high-risk drivers. Now, it is selling F&G Life, which is a subsidiary of St. Paul Fire and Marine Insurance Co., even though the operation is making money and growing.

"We can better deploy these resources in our core ... commercial liability insurance operations," Monfried said. "We determined some time ago with the thousands of insurance companies that operate in the U.S. and internationally that the road to success at the St. Paul is to be a very focused company."

Monfried said F&G Life is growing rapidly, but the money it has been making in recent years has been reinvested in the subsidiary rather than paid to the parent.

Old Mutual is picking up F&G Life which has about 300,000 policyholders, $18.6 billion of life insurance in force and $4.7 billion of annuity account value.

Stout said negotiations between F&G Life and Old Mutual began six months ago.

"Culturally and from a business philosophy we agree and we think we can work together to build this business," Stout said.

Old Mutual has been building a U.S. presence through acquisitions. Last year, it acquired Boston-based money manager United Asset Management Corp., which owned Investment Counselors of Maryland Inc. in Baltimore, and Pell, Rudman & Co., which also has an office here.

The boards of Old Mutual and St. Paul have approved the deal. But the transaction is subject to regulatory approvals, which could take several months, the companies said.

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