Offer values insurer at £888m; GWP falls 8.5%

Lloyd's insurer Brit Insurance and Achilles, a new company formed by private equity firms Apollo and CVC Capital Partners, have agreed the terms of a recommended cash offer of up to £11 per share for Brit.

"I am pleased that we have reached agreement on the terms of the offer which values Brit Insurance's shares at a significant premium to the prevailing market price prior to the commencement of the offer period," said Brit chairman John Barton in a statement.

"Having given full consideration to the offer from Achilles, the independent directors believe it represents good value for Brit shareholders and recommend that they accept the offer."

The proposal comprises an offer and a capital distribution of £0.30. Under the terms of the offer, all accepting Brit shareholders will be entitled to receive £10.45 in cash plus a contingent value payment (CVP) of up to £0.25 in cash per Brit share. In addition, entitled Brit shareholders will remain eligible to receive the £0.30 capital distribution payable in cash on 7 December 2010.

The amount of the CVP will be based on the extent to which Brit's net tangible assets per share at 31 December exceed £10.75.

Brit said the aggregate amount payable under the proposal, should Brit be elligible for the maximum £0.25-a-share CVP, values Brit's issued and to-be-issued share capital at around £888m. The offer proce of between £10.75 and £11 a share is a 47%-51% premium to the closing price of £7.29 per Brit share on 10 June 2010, and a 40%-44% premium to the average closing price of £7.66 per Brit share for the six-month period ended 10 June 2010.

Interim results

Separately, Brit has announced that its gross written premium for the first nine months of 2010 fell 8.5% to £1.22bn from £1.33bn in the same period of 2009. The company said lower premium volumes reflect active portfolio management and a disciplined approach to renewals in cases where premium rates are under excessive pressure.

Brit achieved average premium rate increases on renewed busniess in the first nine months of 2010 of 1.1%, compared with an increase of 4.8% in the same period of 2009.

The insurer reported that overall development of prior-year claims reserves continued to be positive.

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