Revised model planned after collapse of sale talk with Towergate

Capita will not withdraw from the legal expenses market after talks to sell the business to Towergate fell apart.

The future of Capita Legal Expenses (CLE), which handles around £15m in premiums, had been uncertain after sale talks with Towergate collapsed last month.

It is also understood that Capita had explored putting the business into run-off and had approached a company, thought to be DAS, to handle it.

A spokesman for Capita said this week that following a review of the business, the company had decided not to withdraw from the legal expenses market.

“We are now putting together the plan to implement a revised business model.”

The spokesman would not comment further on the new plan for Capita Legal Expenses.

Reports said that the talks with Towergate collapsed during the due diligence phase.

Towergate is understood to have been stalking CLE for a year.

Towergate group operations director Max Carruthers was a former director of Eastgate Legal and Medical Services, which was bought by Capita in 1998.

Other legal expenses companies, including DAS and Arag, are also understood to have been in discussions with CLE to buy the business.

Legal expenses sources said the large number of solicitors on Capita’s panel had put suitors off, along with the fact that business had been “cherry-picked” by rival companies in recent years.

Sources said that after the collapse of the discussions with Towergate, Capita had approached DAS with a view to it handling the run-off of the legal expenses business, but this had also been rejected.

A spokesman for DAS said the company could not comment owing to a confidentiality agreement.

Capita’s legal expenses book is mainly underwritten through a captive insurance company in Guernsey.

Sources said that the use of a captive insurance company complicated any sale or run-off arrangement.