One Beacon says it expects an after-tax charge of $101 million in the third quarter related to a deal to send its runoff business to an affiliate of Armour Group Holdings.

“The sale of our runoff business is the final step in our transformation to a pure specialty company,” says Mike Miller, OneBeacon's chief executive officer, in a statement. He says the sale will free up more than $100 million of capital.

Under the terms of the agreement with Armour—a Bermuda-based company that focuses on runoffs and other opportunities in the insurance and reinsurance industries—OneBeacon will transfer to Armour certain legal entities within the OneBeacon Group, which will contain assets, liabilities and capital supporting the runoff business.

The deal includes some staff and office space, OneBeacon says.

In addition to the $101 million third-quarter charge related to the transaction, the Minnetonnka, Minn.-based insurer says it expects to record about $107 million in losses related to its runoff business, which includes non-specialty commercial lines and other business.

Selling Essentia Insurance to Markel

OneBeacon says it has also entered an agreement to sell its Essentia Insurance subsidiary to Markel Corp.

Essentia provides collector car and boat insurance through Hagerty Insurance Agency.

OneBeacon is terminating its 5-year exclusive underwriting arrangement with Hagerty, the company says. OneBeacon and Hagerty were “unable to reach mutually acceptable terms to extend the relationship,” Miller explains. “We believe the economics associated with the termination of the Hagerty agreement and the related sale of Essentia fairly compensate OneBeacon, marking the end to what has been a profitable venture.”

OneBeacon says it expects to book a $23 million pretax gain on the sale of Essentia after the close of the deal, which is expected during the first quarter 2013. The loss reserves and unearned premium reserves prior to the sale of Essentia will stay with OneBeacon to be runoff, the company says.

Special Reports /

OneBeacon Sells Runoff, Collector Car and Boat Businesses

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