Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) has sold its UK subsidiary Lloyd’s Syndicate 1301 Broadgate Underwriting (2010) Ltd. to Bermuda-based Torus Insurance Holdings Ltd. for ₤11 million (NIS 64 million). Clal Insurance expects to report a capital gain of several million shekels on the sale.
The sale comes six weeks after Clal Insurance, a subsidiary of Nochi Dankner-controlled IDB Holding Corp. Ltd. (TASE:IDBH), announced talks to sell Broadgate. The sale is subject to approval by Lloyd's of London, and due to come into effect on January 1, 2012.
Clal Insurance is meanwhile pursuing talks to finalize the sale of its wholly-owned US subsidiary Guard Insurance Group Inc. to Employers Holdings Inc. (NYSE: EIG) for $312 million. The parties have signed a nonbinding letter of intent. If closed, Clal Insurance expects to report a pretax capital gain of NIS 231-161 million on the sale.
Clal Insurance will bear Broadgate's underwriting expenses through 2011, including insurance events in 2012 on policies sold this year.
Clal Insurance reportedly sold Broadgate for two reasons. The first is to reduce its exposure to natural disasters, exposure which resulted in heavy losses by Broadgate this year on payouts to the earthquake and tsunami in Japan, and natural disasters in Australia and New Zealand. The second reason is related to the ongoing talks by IDB to sell Clal Insurance to Pan-European Permira Funds LLC. Permira does not want Clal Insurance's non-Israeli operations.
Clal Insurance acquired Broadgate for just ₤1 in 2001. The real payment was in the provision of guarantees and capital over the years. Through the end of 2009 Clal Insurance reported pretax profits of NIS 210 million from Broadgate, but most subsequently reported losses of NIS 192 million, due to payouts for natural disasters. It expects Broadgate to report more losses for the third quarter of 2011.
Clal Insurance's share price rose 4% by mid-afternoon today to NIS 55.18, giving a market cap of NIS 3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on September 20, 2011
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