OneBeacon Insurance Group Ltd. has agreed to sell its runoff business to an affiliate of Armour Group Holdings in a deal in which it expects to record a $101 million third-quarter charge. The move represents the final step in the company's transformation to a pure specialty company, according to OneBeacon's chief executive officer.
Under the transaction, OneBeacon said it will transfer to Armour Group certain legal entities within OneBeacon, which will contain the assets, liabilities including gross and ceded loss reserves and capital supporting the runoff business and infrastructure of this business, including staff and office space. Armour is a Bermuda-based group of companies that structures and transacts runoff and other businesses in the insurance and reinsurance sectors.
"This complete exit from our legacy liabilities is a major step in that transition," said Mike Miller, chief executive officer OneBeacon, in a statement. "The charge associated with the sale, while significant on a GAAP basis, is in line with our view of the economics of running off the liabilities over time." The transaction needs regulatory approvals, and is expected to close in 2013.
The transaction will free up more than $100 million of capital, net of the loss on the transaction, "further enhancing our financial flexibility," Miller said.
OneBeacon (NYSE: OB) is a Bermuda-domiciled holding company whose underwriting companies sell specialty insurance through independent agencies, regional and national brokers, wholesalers and managing general agencies. Its market is professional liability; ocean and inland marine; collector cars and boats; energy; entertainment, environmental; public entities and commercial surety, among others.
On Oct. 17, Markel Corp. said it planned to acquire Essentia Insurance Co., a Hagerty Insurance Agency underwriter, from OneBeacon. Terms were not disclosed.
Earlier this month, A.M. Best Co. affirmed the financial strength rating of A (Excellent) and issuer credit ratings of a of OneBeacon Insurance Co. and its six pooled and four reinsured affiliates, collectively referred to as OneBeacon Insurance Group.