Hub sells subsidiaries to Fairfax

Broker consolidator Hub International Ltd. (TSE: HBG), is set to sell two of its properties to its own largest shareholder. U.S.-based underwriting subsidiaries Old Lyme Insurance Company of Rhode Island and Old Lyme Insurance Company Ltd. (“Old Lyme”) will be sold to Fairfax Inc. as of January 1, 2002, the company announces. The value of the transaction, based on book value as of December 31, 2001, is about US$42 million.
Fairfax Inc. is a subsidiary of Fairfax Financial Holdings (TSE: FFH), the largest shareholder in Hub. Both underwriting operations were purchased by Hub last year as part of its acquisition of the Kaye Group. As part of the deal, Hub will retain management of Old Lyme and retain ownership of Kaye’s Claims Administration Corporation.
The purpose of the move is to reduce Hub’s direct ownership of underwriting operations, which will deal with the company’s brokerages through contingency agreements or affiliations, as is common with other consolidators. “Hub’s mission is to serve our clients primarily as a broker in the insurance marketplace,” says Hub chairman and CEO Martin P. Hughes. “However, by continuing to manage the insurance companies, our underwriting position will remain an important component of our client service capabilities.”
In essence, Hub will neither lose nor gain through the sale, and plans to use the proceeds to pay down its debt, the company says. Old Lyme will continue its involvement with Hub’s group affinity business.