Tower Group Announces Strategic Investment in Lloyd’s Canopius

April 26, 2012

Tower Group announced that it has committed to invest $75 million (based on the current exchange rate) in Canopius Group, Ltd., a privately owned Lloyd’s insurance holding company domiciled in Guernsey, Channel Islands.

“Canopius’ principal business is insurance and reinsurance underwriting through Lloyd’s syndicates managed by Canopius Managing Agents Limited (CMA) and reinsurance through Canopius Bermuda Limited (CBL),” said the bulletin.

It also noted that the “investment is subject to completion of the acquisition by Canopius of Omega Insurance Holdings Limited (Omega), an international insurance and reinsurance group listed on the London Stock Exchange and domiciled in Bermuda. Canopius publicly announced an offer to acquire Omega earlier today.” [See related article]

Tower explained that under the terms of the agreements executed by Tower and Canopius, “should Canopius close its proposed acquisition of Omega, Tower would acquire 10.7 percent of the ordinary share capital of Canopius (the Investment) and have the right to appoint one member of the Canopius board of directors.

“Canopius has also committed to assist Tower, at Tower’s option, with the establishment of a presence at Lloyd’s (the Lloyd’s Transaction), subject to the required approval of Lloyd’s and the Financial Services Authority. Finally, Tower would acquire an option (the Option), exercisable in its sole discretion, to combine with the Bermuda reinsurance business currently operated by Canopius, which combination, if effected, is expected to enhance the profitability of Tower’s Bermuda reinsurance operations.”

Tower group’s President and CEO Michael Lee noted: “We are pleased with the opportunity to make a significant investment in Canopius to further expand our business relationship, which we commenced in July, 2011 as a quota share reinsurer of Canopius.

“We have a very high regard for the Canopius management team led by its Executive Chairman, Michael Watson, and its strong track record and expertise in the specialty and international business underwritten through the Lloyd’s market.

“In connection with the Investment, we have also been provided the opportunity to achieve two very important strategic objectives. First, through the Lloyd’s Transaction, we intend to significantly accelerate our involvement with the Lloyd’s market and its access to profitable specialty and international business.

“Secondly, through the Option, we will have the opportunity to work with Canopius to carefully evaluate various transaction structures, including a combination with the Bermuda reinsurance business currently operated by Canopius, to enhance our overall profitability. We intend to exercise this Option if we believe that the execution of the merger would allow us to achieve a return on equity in excess of our current target range of 10 percent to 12 percent.”

Source: Tower Group

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