St. Paul acquisition of London Guarantee secures Canadian positioning

Minnesota-based The St. Paul Companies (NYSE: SPC) has purchased specialty liability underwriter London Guarantee Insurance Co. from the Great West Lifeco Inc. (TSE: GWO) for about $125 million.London Guarantee is ranked second as market leader in underwriting surety business and financial/professional service products in Canada. The company’s total net written premiums for the 2000 financial year totaled $65 million, with surety business accounting for two-thirds of revenue. London Guarantee employs 200 staff. No announcement has been made by St. Paul to future staff or management changes.St. Paul CEO Douglas Leatherdale describes the acquisition as a "strategic investment" in relation to the group’s ambitions of securing top-ranking positions in the specialty underwriting markets. "This acquisition immediately increases our presence [in Canada] and expands our market in two of our more profitable specialty businesses at a fair price."It is expected that St. Paul’s surety underwriter Northern Indemnity will be absorbed into London Guarantee as a single subsidiary. Leatherdale believes the London Guarantee acquisition will provide a modest earnings gain for the 2002 financial year.Great West’s decision to sell London Guarantee was determined by the fact that the operation did not fit into the group’s long-term strategic plans, says CEO Raymond McFeetors. "These businesses [represented by London Guarantee] were not core to Great West Lifeco’s Canadian operations. Therefore, after a strategic review, it was determined to exit the business conducted by London Guarantee."