CGNU sells U.S. p&c business at discount

The strong market position of CGU’s Canadian operations should leave it untouched in the wake of the CGNU group’s decision to divest its U.S. general insurance operations. Mark Webb, president of CGU Canada says, “the Canadian operations clearly meet the strategic direction that CGNU wants to take, which is to be top five in the market”.

Part of CGNU’s strategy includes the recent sale of the U.S. p&c operations for US$2.1 billion, plus an inter-company loan of US$1.1 billion including US$470 million in cash and the return of retained business valued at US$630 million, to White Mountains Insurance Group Ltd. of New Hampshire. The retained businesses, to be held by CGU’s holding company, include its Canadian operation, Pilot, as well as its U.S. life operations. The price tag represents a loss for CGNU, pegged at about 38% less the net asset value of the operations. However, as a result of the arrangement, CGNU will have freed itself from future liabilities in the U.S. where insurers continue to be punished by long-tail claim costs arising from asbestosis and environmental losses.