Business Moves

Aon, Old Republic Insurance Co.

Chicago-based Aon has taken further steps to exit the property and casualty underwriting business by moving to sell its Construction Program Group (CPG). Aon also announced that it would strengthen reserves for its remaining specialty property and casualty business by approximately $100 million, while continuing to explore the sale of the remaining underwriting business.

Aon signed a letter of intent to sell its CPG, a managing general underwriter, to Old Republic Insurance Co. for cash consideration of $85 million. The transaction also includes the transfer of approximately $300 million of unearned premium and claim reserves currently on the books of Virginia Surety Co. Inc., which relate to business previously written through CPG. The sale of CPG and previously announced pending sale of Aon Warranty Group and Virginia Surety — part of the strategic exit of underwriting — are anticipated to be completed in the fourth quarter of 2006.

Aon has placed the balance of its specialty property and casualty business related to Aon Warranty Group, Virginia Surety and CPG in run-off. The firm expects to strengthen specialty reserves by approximately $100 million effective in the third quarter of 2006. The majority of the increase relates to National Program Services (NPS), an independent managing general underwriter which wrote habitational risks on behalf of Virginia Surety. The principal of NPS was convicted of criminal theft in 2004 in connection with NPS’s actions involving Virginia Surety and other insurers.

Aon officials said the exiting of the underwriting business would permit the firm to focus on its core businesses, including brokerage.

“The steps we are announcing today continue implementation of our decision to exit the specialty property and casualty underwriting businesses,” said Greg Case, Aon president and chief executive officer. “We have placed the remainder of the specialty property and casualty programs in run-off, and will continue to explore disposition alternatives for other portions of the book. We believe this will enable us to focus our attention and resources on our core businesses.”

USI Holdings

USI Holdings Corp. received an inquiry from a private equity firm interested in acquiring all of the outstanding common stock of the company. In response, the company’s board of directors formed a special committee consisting of outside directors to review the proposal and consider all of the company’s options.

Lazard Freres & Co. LLC and Dewey Ballantine LLP have been engaged to assist in the review. No details of any offer were disclosed. USI said it could give no assurance that any transaction would be consummated.

For the third quarter of 2006, the company expects to report total revenues of approximately $130.5 to $131.5 million compared to total revenues of $127.3 million in the third quarter of 2005, and income from continuing operations, before taxes, of approximately $8 to $9 million compared to $9.8 million in the third quarter of 2005.

National Indemnity, Equitas

Equitas, the Lloyd’s vehicle set up in 1996 to run off asbestos and environmental claims, and Berkshire Hathaway’s subsidiary National Indemnity reached an agreement in principle where National Indemnity would acquire Equitas. The deal is subject to approval from Lloyd’s and the U.K.’s Financial Services Authority on a structure in which National Indemnity will undertake to reinsure all Equitas’ liabilities; provide up to a further $7 billion of reinsurance cover to Equitas; take on the staff and operations of Equitas and conduct the run-off of Equitas’ liabilities.

If the transaction is completed, underlying policyholders will have the benefit of up to an additional $7 billion of reinsurance cover. This would nearly double the assets available for the run-off of Equitas.

Protective Insurance, Paladin Catastrophe

Protective Insurance Co., a subsidiary of Indianapolis-based Baldwin & Lyons Inc., entered into an agreement with newly formed Paladin Catastrophe Management to produce property catastrophe reinsurance in the U.S. Paladin Catastrophe Management will underwrite selected business on behalf of Protective. Its operations will be managed by David Ingrey from offices in Chester, N. J. and will be a broker market only, targeting regional catastrophe business in the U.S., other than Florida hurricane and California earthquake exposed business and will also consider specific terrorism reinsurance, as well as property per risk and property aggregate stop loss programs.

ACA Assurance, N.H. Department

ACA Assurance has temporarily been placed in rehabilitation by the New Hampshire Insurance Department. ACA Assurance is a Manchester, N.H.-based fraternal benefit society that promotes the preservation of the French language and culture. The society provides insurance benefits to its members. ACA Assurance will remain in operation during the rehabilitation and will continue to underwrite and issue policies and pay claims. Officials hope the rehabilitation will assist the insurer in getting its insurance operations back onto a strong footing.