London-based insurer Beazley Group has acquired First State, a surplus lines underwriter manager of commercial property risk, from the Hartford Financial Services Group.

Beazley said it was acquiring the unit for a total of $35.4 million in cash. The transaction does not include First State's specialty and health care programs. Those programs will remain with Hartford. The Hartford, Conn.-based firm said it was shedding a non-core operation with the sale.

Beazley said in a statement that First State, which is led by President and Chief Operating Officer Judy Patterson, is headquartered in Boston and has offices in Atlanta, Chicago, Los Angeles, New York and San Francisco.

While First State has not reported its earnings as a separate unit, Beazley said First State's 2008 pro forma profit would be approximately $3 million. The company had gross assets of $10.6 million as of Nov. 30, 2008.

The London-based insurer said it will contribute additional capital to its Lloyd's syndicate of ?27 million ($39 million U.S. at the current exchange rate) to support First State's underwriting.

“The acquisition of First State marks a significant step forward in the development of our U.S. strategy, which focuses on gaining access to profitable business that would not normally come to London,” Beazley Group Chief Executive Andrew Horton said in a statement.

“We have reinsured First State for many years and the expertise of their team and quality of their broker relationships is well known to us,” Mr. Horton added.

Beazley also announced it plans to raise an additional ?163 million ($235 million) from equity markets to support the deal.

In a statement from Hartford, Gary Thompson, executive vice president for the carrier's property and casualty middle market and specialty lines insurance, said the sale is part of the company's change in strategy.

“First State Management Group is an excellent company with one of the most professional teams in the industry,” said Mr. Thompson. “This is an agreement we have been working on for many months. We are entering into this transaction to reduce our exposure to excess and surplus lines property insurance, which is not core to our business. First State Management Group's livestock and nursing home programs will transition directly to The Hartford.”

Beazley also reported its full-year results, saying profit before tax decreased 37 percent, or ?51 million ($72 million), to ?87 million ($125 million), or 18.8 pence (27 cents) a share. This was despite a 12 percent increase in gross written premium to ?876 million ($1.26 billion) from prior-year ?781 million ($1.13 billion).

The group reported its combined ratio for the year was unchanged on a year-over-year basis at 90.

Earnings were also affected by losses from Hurricanes Ike and Gustav that amounted to ?25 million ($36 million) net of reinsurance recoveries. The company reported investment losses of ?26 million ($37 million).

The company said premiums in its U.S. business grew 54 percent to $269 million and the business remains “a key strategic objective” of the group.

Special Reports /

Beazley Group Acquires Hartford Unit

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