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OneBeacon Insurance Group
today announced that it has entered into a definitive
agreement to sell its runoff business to an affiliate of Armour Group Holdings
Limited. OneBeacon will transfer to Armour certain legal entities within the
OneBeacon group, which will contain the assets, liabilities (including gross
and ceded loss reserves), and capital supporting the runoff business, as well
as certain elements of the runoff business infrastructure including staff and
office space. The company expects to record an after-tax charge of $101
million in the third quarter related to the transaction.
Said OneBeacon CEO Mike Miller, "The sale of our runoff business is the final
step in our transformation to a pure Specialty company. This complete exit
from our legacy liabilities is a major step in that transition. The charge
associated with the sale, while significant on a GAAP basis, is in line with
our view of the economics of running off the liabilities over time.
Importantly, this transaction will free up over $100 million of capital, net
of the loss on the transaction, further enhancing our financial flexibility
and allowing us to focus our full attention on building on our already
high-performing Specialty results."
The runoff business has been included in OneBeacon's Other Insurance
Operations reportable segment, which includes nonspecialty commercial lines
and other legacy runoff business. Beginning with the company's third quarter
financials, the runoff business will be accounted for as held for sale and as
a discontinued operation. OneBeacon expects to record approximately $107
million of after-tax losses in its third quarter results related to its runoff
business. In addition to the $101 million related to the transaction,
OneBeacon will record a $6 million net loss from discontinued operations
driven primarily by adverse prior year loss reserve development related to a
legacy assumed reinsurance treaty.
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