St. Paul gains top surety ranking in Canada

U.S., Minnesota- based specialty risk insurer St. Paul Companies has acquired London Guarantee Insurance Co. from Canadian-based Great West Lifeco. Inc. for $125 million. The deal has boosted St. Paul to lead-ranking underwriter of surety business in Canada.

The deal was closely followed by an announcement by St. Paul in the U.S. that it had formed a new operating division, Global Surety and Construction Group, to focus its underwriting interests in the construction fields. Robert Lamendola has been appointed president of the new operation.

London Guarantee, which specializes in the areas of surety, bond and professional indemnity products, is regarded as the second largest Canadian underwriter in these fields. The company wrote approximately $65 million in premiums for the 2000 financial year, of which surety business accounted for 66%. Financial and professional services products produced about $19 million in annual premium. London Guarantee employs 200 staff – no announcement has been made to possible restructuring redundancies. “This acquisition represents a significant strategic investment for the St. Paul in Canada,” says group CEO Douglas Leatherdale. London Guarantee is expected to contribute “modestly” to St. Paul’s earnings for 2002, he adds.

Great West Lifeco CEO Raymond McFeetors says the decision to sell London Guarantee came about as the company did not fit into the group’s core interests. “Therefore, after strategic review, it was determined to exit the business conducted by London Guarantee.”

Lamendola notes that London Guarantee’s business mix largely consists of “mid to small-sized accounts” while St. Paul’s Canadian operation, Northern Indemnity, has been focused toward larger accounts. “We should be able to integrate London Guarantee’s and the St. Paul’s surety operations quickly and efficiently.”

Lamendola says Northern Indemnity will first be integrated into London Guarantee, following which, it is envisaged that the combined operation will be absorbed into St. Paul Canada. The group’s total surety business worldwide amounts to US$426 million (based on 2000 financial returns), while overall construction-related business is in the order of US$488 million annually.