Hub International Limited (Hub) (TSE:HBG.) announced today that it has agreed to sell its underwriting subsidiaries, Old Lyme Insurance Company of Rhode Island, Inc. and Old Lyme Insurance Company, Ltd. (Old Lyme) to Fairfax Inc. (Fairfax), effective January 1, 2002.
Completion of the transaction is subject to receipt of approval from and compliance with the requirements of applicable regulatory authorities. Fairfax is a subsidiary of Fairfax Financial Holdings Limited (Toronto Stock Exchange symbol: FFH), Hub's largest shareholder.
Hub, through its Kaye Group Inc. (Kaye) subsidiaries, including its underwriting manager, Program Brokerage Corporation (PBC), will continue both to manage Old Lyme and to operate Kaye's Claims Administration Corporation unit (CAC), which is not being sold. Both Old Lyme and CAC have been managed by Kaye subsidiaries since they were formed over 20 years ago. Old Lyme has consistently maintained a combined loss and expense ratio superior to property and casualty industry norms.
The sale, for Old Lyme's book value as of December 31, 2001, approximately US$42,000,000, represents no gain or loss to Hub, which will use the proceeds to pay down debt.
Martin P. Hughes, Chairman and Chief Executive Officer of Hub, in making the announcement, explained that the sale of Old Lyme aligns Hub's underwriting arrangement with that of other major public brokers: participation in underwriting opportunities by affiliations or contingency agreements rather than through direct ownership of insurance companies. Mr. Hughes said, "Hub's mission is to serve our clients primarily as a broker in the insurance marketplace. However, by continuing to manage the insurance companies, our underwriting position will remain an important component of our client service capabilities."
Bruce D. Guthart, President of Hub's United States Operations and Chairman, President and Chief Executive Officer of Kaye, stated that the sale would not affect Old Lyme's ongoing commitment to participating, as underwriters, in Hub's affinity group program business. Mr. Guthart said, "We understand the importance of our continued involvement with our network of over 1,000 producers and our program business insurers and reinsurer partners." Marc I. Cohen, President of PBC, CAC and current President of Old Lyme, added, "PBC will continue developing and managing existing and new program business and servicing our agent and broker network, and CAC will have an undiminished role in claims handling and loss control."
Hub International Limited is an international insurance brokerage that provides a broad range of property, casualty, life and health, employee benefits, investment and risk management products and services through offices located in Canada and the United States.