Business Moves

November 5, 2006

Aon, Old Republic Insurance Co.

Chicago-based Aon has taken 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 exploring 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 on the books of Virginia Surety Co. Inc., which relate to business previously written through CPG. The sale of CPG and the previously announced pending sale of Aon Warranty Group and Virginia Surety, part of the underwriting exit strategy, 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 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 risk on behalf of Virginia Surety. The principal of NPS was convicted of criminal theft in 2004 in connection with NPS’s actions with respect to Virginia Surety and other insurers.

Aon officials said exiting 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 CEO. “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 the company’s options.

Lazard Freres & Co. LLC and Dewey Ballantine LLP have been engaged by the special committee to assist in its review. No details of any offer were disclosed.

USI said it could give no assurance that any transaction will be entered into or consummated.

For the third quarter of 2006, the company expects to report total revenue of approximately $130.5 million to $131.5 million, compared to total revenue of $127.3 million in the third quarter of 2005. Income from continuing operations, before taxes, is expected to be approximately $8 million 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 a mountain of asbestos and environmental claims, and Berkshire Hathaway’s subsidiary National Indemnity reached an agreement in which National Indemnity will acquire Equitas.

Following approval, 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.

The transaction is scheduled to occur in two phases. In phase one, National Indemnity will provide reinsurance cover to Equitas of $8.7 billion above the March 31, 2006, reserves of Equitas, minus an adjustment for payments and recoveries since that date. The premium payable to National Indemnity will include all of Equitas’ assets minus $324 million and a contribution of $135.67 million from Lloyd’s.

In phase two, Equitas will seek approval of the High Court to transfer all the liabilities of reinsured names into Equitas or a subsidiary of Berkshire Hathaway. If such a business transfer occurs before the end of 2009, National Indemnity will provide up to $1.3 billion of additional reinsurance cover for a further premium of up to $75.4 million. At the time of any such business transfer, or on Dec. 31, 2009, if a transfer has not occurred, Lloyd’s will contribute $34 million.

If both phases of the transaction are completed, underlying policyholders will have the benefit of up to an additional $7 billion of reinsurance cover. That would nearly double the assets available for the run-off of Equitas, the company said.

Converium, National Indemnity

Swiss-based reinsurer Converium AG reached an agreement with National Indemnity, a Berkshire Hathaway company, to sell its North American operations for $295 million, comprised of $95 million in cash and $200 million in assumption of debt.

Converium said it has not provided any guarantee or indemnity in respect to the reserves of the North American operations. The transaction is subject to regulatory approvals and customary closing conditions.

The reaction for the rating agencies was immediate and positive. The deal should end a tumultuous period for Converium. In 2004, the company was hit by what its then CEO called a “perfect storm” — heavy losses, reserve strengthening and ratings downgrades (below “A”) — stemming mostly from North American operations.

Arch, Zurich

Arch Reinsurance Ltd. announced plans to open a branch office in Zurich, Switzerland. The office will focus on regional business that is complementary to the existing relationships of Arch Re in Bermuda and a strong emphasis on the broker market.

Operating as Arch Reinsurance Ltd., Hamilton, Bermuda, European Branch Zurich, it will be headed by two new executives.

AXA, Alpha Insurance

AXA reached an agreement with Alpha Bank to acquire its insurance subsidiary, Alpha Insurance, for $322 million.

AXA and Alpha Bank, Greece’s second largest bank, also signed a long-term exclusive agreement to pursue and strengthen the existing bancassurance partnership.

Completion of the acquisition is subject to regulatory approvals in Greece.

AXA Group has major operations in Western Europe, North America and in the Asia/Pacific area. AXA is listed and trades under the symbol AXA on the Paris Stock Exchange.

Worldwide Facilities

Surplus lines insurance broker Worldwide Facilities Inc. announced it is relocating its corporate headquarters and Los Angeles Branch to downtown Los Angeles, with the move effective Nov. 6.

The company signed a lease with Brookfield Properties Inc. for 23,000 square feet of corporate space at Ernst & Young Plaza, a 1.2-million-square-foot, 41-story office tower located at 725 South Figueroa Street in downtown Los Angeles.

Worldwide’s offices will occupy the entire 19th floor. The company will be relocating and expanding from its current Mid-Wilshire location.

In addition to its Los Angeles location, Worldwide has branch offices in Irvine, Sacramento, Calif., Seattle, Phoenix and Atlanta.

Saylor & Hill, Globex International

Oakland, Calif.-based Saylor & Hill, a provider of risk management, insurance and employee benefits services, expanded its capabilities to serve U.S.-based companies with multinational operations.

Through a new partnership with Globex International Group, Saylor & Hill plans to assist companies with multinational compliance to local laws and practices. Globex is an international risk management, insurance and employee benefits consultancy firm with a worldwide network of local agents and brokers in more than 100 countries.

Saylor & Hill said the partnership developed in response to demand from clients that are opening offices and facilities in other countries. With Globex acting as local representation, Saylor & Hill hopes to provide its clients with expanded international services, including risk analysis and employee benefits assessments.

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