Wellington and Catlin in Merger Talks

October 26, 2006

Two major Lloyd’s insurers, who also have extensive operations outside the U.K., have confirmed that they are “in discussions” about a possible sale/merger.

In a regulatory announcement on Oct. 24 Wellington Underwriting plc noted a recent “increase in its share price.” The Company said that its “Board confirms that it is in discussions with Catlin Group Limited (‘Catlin’) which may or may not lead to a cash and shares offer being made for the Company.” Catlin gave the same notice concurrently with Wellington’s.

Although no formal steps have been taken, the two companies might make a good fit. Both have substantial subsidiary operations in the U.S. as well as their operations at Lloyd’s. Catlin, which is headquartered in Bermuda, also operates U.K. and Bermuda subsidiaries.

Wellington said its Board “will need to be satisfied, inter alia, that the business plan for the enlarged group is likely to deliver greater value to Wellington shareholders than Wellington’s standalone strategic plans. In the absence of an offer which satisfies this requirement, Wellington will continue to work towards the delivery of its stated strategic objectives as set out in its interim results for the six months ended 30 June 2006. Discussions between the parties are continuing and the Board will update shareholders in due course. In the meantime the Board advises shareholders of Wellington to take no action.”

Ed. Note: London’s Insurance Times first reported that the two companies were in discussions on Oct. 7. The report, which has now been confirmed, could explain the rather surprising action taken by A.M. Best in putting Catlin’s ratings under review (See IJ Website Oct. 20). Wellington was hit by hurricane losses in 2004 and 2005, and its financial position is seen as substantially weaker than Catlin’s.

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