North American pension fund buys AIG Lloyds insurer

North American pension fund buys AIG Lloyds insurer

North American pension fund buys AIG Lloyds insurer

by Sonali Basak and Katherine Chiglinsky

Canada Pension Plan Investment Board agreed to buy Ascot Underwriting Holdings Ltd., the Lloyd’s of London insurer tied to American International Group Inc., as part of a $1.1 billion deal.

CPPIB will also acquire a related Ascot entity, according to a statement Friday from AIG. The New York-based seller will get about $240 million in cash proceeds, reflecting its minority stake. Ascot’s ownership has included an employee trust.

AIG’s Peter Hancock is the third straight chief executive officer to shrink the company through divestitures, announcing an agreement in August to sell a mortgage guarantor to Arch Capital Group Ltd. and previously making deals to scale back in Taiwan and Central America. The company has raised more than $90 billion since it started to sell units after its 2008 bailout. Deals continued even after the company repaid the rescue as Hancock sought funds for share buybacks and activist investors including Carl Icahn called for a simpler insurer. AIG has also been cutting jobs, including in the U.K.

CPPIB, Canada’s largest pension fund, has been building bets on insurance, agreeing last year to take a stake in Enstar Group Ltd. after striking a deal in 2014 to buy Wilton Re Holdings Ltd. The Canadian firm has also been snapping up energy assets and announced a deal to take a stake in a Glencore Plc agriculture unit.

“We have studied the global property and casualty insurance sector for several years and specifically identified Ascot as an ideal platform through which CPPIB can access diverse global insurance premiums at scale," Ryan Selwood, managing director and head of direct private equity at the buyer, said in a separate statement.

Insurers have been seeking deals for Lloyd’s of London businesses, which offer coverage for unique risks. Prem Watsa, who leads Toronto-based Fairfax Financial Holdings Ltd., bet on the market with his 2015 deal to purchase Brit Plc, which guards against losses in industries such as energy and aerospace. XL Group Ltd. bought Catlin Group Ltd. that year to expand in London.

Copyright Bloomberg 2016