AIG Selling Stake in Ascot Lloyd’s Syndicate; Will Keep Bermuda, Reinsurance Ties

September 16, 2016

American International Group Inc. has agreed to sell its interest in Ascot Underwriting Holdings Ltd. (AUHL) and related syndicate-funding subsidiary Ascot Corporate Name Ltd. to Canada Pension Plan Investment Board (CPPIB) for $1.1 billion.

Total consideration for the deal is $1.1 billion inclusive of CPPIB’s recapitalization of Syndicate 1414’s Funds at Lloyd’s (FAL) capital requirements.

AIG will receive approximately $240 million in net cash proceeds from the transaction, reflecting AIG’s 20 percent stake in AUHL and ownership of ACNL.

CPPIB is an investment management organization that invests the assets of the Canada Pension Plan and its 19 million contributors. As of June 30, 2016, the CPP Fund totaled C$287.3 billion.

The Wall Street Journal reported last month that the deal was under consideration.

The transaction is subject to regulatory approvals.

Ascot and AIG founded the managing agency and the syndicate in 2001. As a global specialty insurance underwriter, Ascot focuses on property insurance, marine insurance, and reinsurance.

AIG will maintain its strategic partnership with Ascot Underwriting Bermuda Ltd. (AUB). While AUB is a wholly-owned subsidiary of AUHL and part of the sale to CPPIB, AUB will continue to serve as the managing general agent for AIG-Ascot Re, which writes assumed treaty reinsurance business on behalf of AIG’s wholly owned subsidiary American International Reinsurance Co. Ltd. (AIRCO) in Bermuda.

As part of the agreement, AIG, CPPIB, and Ascot said they intend to expand a collective commercial relationship in Bermuda, and for AIG to be a preferred reinsurer to Syndicate 1414.

“This deal successfully repositions our strategic focus and underwriting capacity to our relationship with Ascot in Bermuda, while monetizing our position in the syndicate at an attractive value and retaining exposure to the syndicate as a reinsurer,” said Robert Schimek, chief executive officer, Commercial Insurance. “We are also pleased to start a collaborative relationship with CPPIB who we see as an ideal partner for Ascot’s outstanding management team.”

AIG has been overhauling its business and selling off selected units while resisting pressure by activist shareholder Carl Icahn to split the insurer in three. Last month it announced it would sell its mortgage-guaranty unit, United Guaranty, to Arch Capital Group Ltd for about $3.4 billion. In January, AIG agreed to sell AIG Advisor Group to investment funds affiliated with Lightyear Capital. Last week, it was reported to be seeking to raise about $190 million by selling its remaining shares in China’s PICC Property and Casualty Co. Ltd.

This is not CPPIB’s first insurance acquisition. In 2014,it agreed to buy U.S. reinsurer Wilton Re Holdings Ltd for $1.8 billion.
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