Allied World Acquiring Darwin For $550 Million

In 2007, Allied World wrote $1.5 billion in gross premiums, and Darwin wrote $280 million.

Separately, New York-based Alleghany Corp., which owns roughly 55 percent of Darwin's shares, said it expects to receive about $300 million in the deal.

Allied World Assurance Company Holdings, through its operating subsidiaries, is a global provider of insurance and reinsurance solutions. In its most recent acquisition prior to the Darwin announcement, the Allied World bought Converium Insurance (North America).

Mr. Carmilani told NU earlier this year that the Converium deal, which closed in January, was a step in his company's strategy to grow its U.S. reinsurance book.

He noted, however, that Allied World's mix of business has always been tilted toward insurance–nearly 60 percent insurance versus 40 percent reinsurance. He also said the bias toward insurance wouldn't change in 2008.

At the time, he said the company would engage in a strategy "to diversify geographically and by product."

While both Allied World and Darwin write specialty business, with a particular focus on professional liability and some property-casualty programs, Darwin focuses on small-account business.

During the conference call, Mr. Carmilani said the two insurance books are complementary, noting that Allied World's focus in these same specialty product areas is on large-account business. In addition, he noted that Allied World writes high- and middle-excess layers, as opposed to the primary business that Darwin writes.

He also highlighted Darwin's strengths in the health care professional liability sector–through product and risk management service capabilities–and a Web-based underwriting system, "i-bind."

In past interviews, Stephen Sills, Darwin's president and CEO, has told NU that the i-bind system was designed to create an easier experience for specialty brokers placing small professional and management liability policies, and to lower the costs of writing them for the carrier.

Mr. Carmilani said during the conference call that Allied World does not plan to make any changes to i-bind, except perhaps to make it a multicurrency system so it can be used to place business outside the United States.

He also said the health care segment will jump from 3 percent of Allied World's business to 13 percent. In addition, professional liability will rise from 18 percent to 21 percent.

Mr. Sills, who will retire upon the closing of the transaction, did not participate on the conference call announcing the deal.

Jack Sennott, Darwin's chief financial officer, was asked the company's reason for selling during the conference call. He answered by echoing Mr. Carmilani's statements about the business being complementary.

Asked if Allied World was the only potential buyer, he said the board formed a special committee and engaged in a formal process to entertain offers in the first quarter, adding that through an investment bank "more than two handfuls of companies" had expressed interest.

In the end, "we were pleased with the economics and fit going forward" with Allied World, Mr. Sennott said.

In the month's second deal involving a Bermuda buyer, Ironshore said it is entering the Lloyd's market with the proposed purchase of Pembroke Managing Agency and Syndicate 4000 for ?17 million in cash–or about $33.9 million at the latest exchange rate.

Ironshore is a major commercial property-catastrophe writer.

Syndicate 4000 underwrites a portfolio of specialty lines products including financial institutions, professional liability, marine and other select niches.

Ironshore announced it will take over the 2009 underwriting year of account onward, while Chaucer Holdings PLC–the major Pembroke stockholder–will retain the 2008 and prior underwriting years of account.

The transaction is subject to approval from Lloyd's and the United Kingdom's Financial Services Authority.

"The addition of Pembroke completes Ironshore's strategic goal to have three central underwriting platforms–Bermuda, U.S. and Lloyd's," Robert Deutsch, CEO of Ironshore, said in a statement.

Mark Wheeler is the active underwriter for Syndicate 4000, while Pembroke Managing Agency is led by Mark Butterworth, a managing director, with Mr. Wheeler as underwriting director.

"Pembroke offers Ironshore a diverse spread of international financial institutions and professional liability risks, as well as an ideal Lloyd's platform poised for future growth focused on underwriting profits," Mr. Deutsch said.

Mr. Wheeler called Pembroke "an excellent fit within Ironshore. Our business is complementary and our underwriting approach like-minded."

Mr. Wheeler established Syndicate 4000 in 2004. Mr. Butterworth joined Pembroke from Liberty Syndicates, where he was chief operating officer.

Ironshore said Justin Wash–who has been consulting with Ironshore since early 2007 and has 17 years of financial expertise in the Lloyd's market–will join Pembroke as finance director.

The company said Mr. Deutsch is non-executive director of Chaucer, and therefore did not participate in the Chaucer board's deliberations relating to this transaction. He will resign from the board on Dec. 31.

According to an Ironshore representative, Chaucer Holdings PLC will receive ?14.9 million ($29.7 million) for its 76 percent ownership of Pembroke JV, which owns Pembroke Managing Agency, subject to adjustments depending on the value of net assets at the deal's completion.

Two wholly owned subsidiaries of Chaucer provide capital for Syndicate 4000, which has an underwriting capacity of ?73 million ($145.5 million) for 2008.

Chaucer's right to participate on the Syndicate for the 2009 and subsequent years of account will pass to an Ironshore corporate member.

Chaucer said it will retain its participations on the Syndicate for the 2008 and prior open years of account, continuing to provide funds at Lloyd's to support their underwriting. "The open years continue to perform satisfactorily," the firms said.

The proceeds from the sale, Chaucer said, will provide additional working capital for its core businesses.

Chaucer CEO Ewen Gilmour said, "We are delighted to announce this transaction, which demonstrates the value of our syndicate investment and management activities, realizing a significant return for Chaucer shareholders and securing the future of Pembroke's business."

"We have enjoyed a successful partnership with the Pembroke management team over the last four years and wish them and Ironshore every success in the future," he added.

In another deal involving Lloyd's, American International Group Inc. said it acquired Ascot Underwriting Holdings Ltd., the managing agency of AIG's Lloyd's Syndicate 1414.

Ascot is approved by Lloyd's to underwrite general insurance business beginning with the 2001 year of account.

AIG previously held a 40 percent minority interest in Ascot, and this transaction involved an acceleration of its option to purchase the agency in 2012. Terms were not disclosed.

AIG Executive Vice President Nicholas C. Walsh said, "AIG's partnership with this underwriting syndicate at Lloyd's began in 2001 and has already exceeded expectations."

Martin Reith, chief executive of Ascot Underwriting Limited, and associates who have managed the syndicate will continue in their respective roles, said Mr. Walsh.

Mr. Reith said, "We look forward to expanding our relationship with AIG, with whom we have been a partner since our founding." He also said Ascot has achieved rapid growth to become one of the largest syndicates operating at Lloyd's, servicing customers throughout the world from offices in London, Singapore, Spain and Houston, Texas.

In late July, Bermuda-based Max Capital Group Ltd. announced that it entered into an agreement to acquire Imagine Group (UK) Limited ("Imagine Lloyd's"), a Lloyd's insurance operation, from Imagine Insurance Company Limited ("Imagine").

In addition to paying roughly ?11 million ($22 million) in cash, Max Capital said it will replace letters of credit totaling approximately ?90 million ($179 million) that an affiliate of Imagine has provided to fund Imagine Lloyd's syndicate commitments.

Imagine Lloyd's is part of Imagine Group Holdings, a Bermuda-based holding company conducting specialty insurance and reinsurance activities through insurance and reinsurance entities in Barbados, Ireland and Lloyd's.

As part of the agreement, Max said it will acquire some Imagine Lloyd's operations in Denmark and Japan.

Imagine Lloyd's, through Lloyd's Syndicates 1400, 2525 and 2526, underwrites a diverse portfolio of specialty risks including property catastrophe, financial institutions, personal accident, employers' and public liability, and professional indemnity business.

Max Capital writes specialty insurance and reinsurance for corporations, public entities, property-casualty insurance and life-health insurers through operations in Bermuda, Ireland and through Max Specialty in the United States.

The London base of the acquired business will complement Max Capital's current operations in these locations, Max Capital said.

Calling the Lloyd's operation "an ideal fit for Max" in a press statement, Marty Becker, chairman and CEO of Max Capital, said, "We will further diversify our business and achieve access to the important benefits of Lloyd's market participation."

The acquisition is conditioned on the receipt of various approvals including those from the Financial Services Authority and Lloyd's.

Following completion of the transaction, Imagine Lloyd's is expected to be re-branded as "Max Lloyd's Ltd."

Continuing the expansion of Bermuda-based Max Capital Group into the U.S. specialty market, Max Specialty Insurance Company, a Richmond, Va.-based operating subsidiary, acquired Commercial Guaranty Casualty Insurance Company in June.

Commercial Guaranty is an insurance entity licensed to write business in all 50 states and the District of Columbia.

Terms of the deal were not released.

Max Specialty, an excess and surplus lines carrier of Max Capital Group, said it expects that, after filing of the required corporate amendments and after regulatory review, Commercial Guaranty's name will be changed to Max America Insurance Company.

Max Specialty said the acquired operation will primarily support Max Specialty's previously announced entry into inland and ocean marine underwriting.

Stephen J. Vaccaro Jr., president and CEO of Max Specialty Insurance Company, said: "This acquisition gives the Max Specialty team, for the first time, the ability to write both admitted and nonadmitted business. We expect that ability to enable our producers to write more business for more customers, as some of our specialty products are best suited to the admitted marketplace."

First Reserve Corporation, a Greenwich, Conn.-based private equity firm, has joined forces with a group of senior insurance practitioners to create a new specialty insurer, Torus Insurance Holdings Limited (Bermuda).

Torus is supported by a $720 million equity funding from First Reserve, a PE firm specializing in the energy sector.

Senior management of Torus has also invested personally in the new venture.

Operating companies, Torus Insurance (UK) Limited in London and Torus Insurance (Bermuda) Limited in Bermuda, have received authorization from the U.K. Financial Services Authority and Bermuda Monetary Authority.

The companies have also been assigned "A-minus" ratings from A.M. Best, and they started accepting risks incepting on July 1.

David Hope has been appointed chief underwriting officer, and he will act as CEO until Jan. 1, 2009, at which time an unnamed senior industry executive has agreed to assume the position.

Mr. Hope has nearly 30 years experience as an underwriter in the London market. From 2002-2007, he was CEO of the London operations of The Navigators Group Inc, and he previously held senior underwriting positions at Octavian Managing Agency.

Torus is a technical lines insurer specializing in large complex risks with a particular focus on the energy sector. Torus plans to combine high levels of technical underwriting discipline with in-depth engineering and energy industry understanding to create the necessary levels of confidence to write meaningful line sizes on the risks that it selects.

First Reserve Corporation's 25 years of experience in the energy industry across every part of the value chain will give Torus access to a deep and valuable pool of relevant knowledge, the PE firm said.

Mr. Hope said, "Our aim is to focus on building long-term relationships with clients that appreciate the involvement of a partner that takes an active role in managing risk."

"Torus will focus on large commercial and specialty businesses in all major markets, starting with onshore and offshore energy and other large industrial property," moving into other lines during the next 12 months, he said.

Early this month, The Navigators Group in New York announced that it launched underwriting operations in Sweden through its new underwriting agency, NUAL AB, and that it also opened a Stockholm office.

The office, under the leadership of Sverker Edstrom, managing director, will initially focus on management and professional liability products for public companies and privately held firms, such as directors and officers, fiduciary, employment practices, and errors and omissions, underwritten by Navigators Pro, a division of Navigators Management Company.

Chris Duca, president of Navigators Pro, said, "The Nordic countries are among the most innovative and growing economies in the world," adding that Navigators' presence in Continental Europe would strengthen the insurer's capabilities and further enable it to provide innovative insurance solutions to directors and officers of corporations"

Coverage is underwritten by Navigators Syndicate 1221 at Lloyd's.

(Additional reporting by Daniel Hays and Mark Ruquet)

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