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 in mid-February that 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.

Merchants National Insurance Company, a wholly-owned subsidiary of Merchants Insurance Group based in Buffalo, N.Y., began accepting new business on February 1, 2009.

Merchants National, the new excess and surplus lines insurance company, is the latest company to join the Merchants Insurance Group family, the company said in a statement released earlier this month.

The new company targets franchised hotels and motels, and writes the business in conjunction with Southern Hospitality Underwriters, a Georgia-based independent full-service wholesale brokerage agency that specializes in business insurance for the hotel industry.

As of February 1, Merchants National received approval to write business in Alabama, Georgia, Louisiana, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Texas and Vermont.

Phyllis Drozdzak, Merchants National Program manager, said that Merchants National will expand into other states in the coming months.

Merchants National has an "A-minus" rating from A.M. Best.

Valiant Insurance Group announced in mid-February that it has established a new insurance vehicle, Valiant Specialty Insurance Company, which will serve as the excess and surplus lines insurance carrier for Valiant's U.S. operations.

Delaware-licensed Valiant Specialty has an "A-minus" rating from A.M. Best.

Valiant is currently able to offer surplus lines capability to clients in a majority of the U.S. states and intends to continue to seek additional state surplus lines eligibilities for Valiant Specialty Insurance Company.

Valiant Insurance Group provides specialty products including professional liability, marine, casualty and management liability. Valiant Insurance Group is a subsidiary of Bermuda-based Ariel Holdings Ltd.

C.V. Starr & Co. and Ironshore Inc. have teamed up to launch Iron-Starr Excess Agency Ltd., a specialty lines insurance and reinsurance managing general agency, the two firms announced in late January.

In separate statements, the companies said Iron-Starr Excess, domiciled in Bermuda, will initially focus on the production of excess financial and commercial lines insurance and reinsurance products through U.S. insurers, Bermuda, or other offshore carriers.

Products will also include catastrophic excess casualty insurance for Fortune 2000 companies and other clients. It will issue policy limits up to $75 million.

Maurice R. "Hank" Greenberg, chairman and chief executive officer of New York-based C.V. Starr, said, "There are significant opportunities in this market, and C.V. Starr together with Ironshore has the team to get the job done. We are delighted to be partnering with them in this venture."

"This partnership enables Ironshore to enter the excess casualty market with additional backing and support to offer larger limits, consistent with the needs of our clients," said Kevin Kelley, CEO of Bermuda-based Ironshore.

"We look forward to developing a long-standing relationship with C. V. Starr and are excited about this new venture. This arrangement will assure customers that during these challenging times, they have a syndicated alternative that understands their needs and has the experience to be a long-term solution."

C.V. Starr is an independently owned holding company with insurance agencies and a portfolio of global investments writing specialty lines covering aviation, marine, energy, excess casualty and property, accident and health, including risks with international exposures.

Ironshore provides broker-sourced specialty commercial property-casualty coverages for risks located throughout the world.

Special Reports /

Beazley Group Acquires Hartford Unit

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