Highway pre-tax profits fall to £1.4m in interim results.
Highway Insurance Group has confirmed that it set to be acquired by Liverpool Victoria. The offer values the entire issued share capital of Highway at approximately £150 million.
Yesterday, Highway said it was having "advanced discussions" that could lead to a takeover.
In a statement to the London Stock Exchange this morning, Highway said: "The Board of Highway Insurance Group has announced today that it has reached agreement on the terms of a recommended cash offer that is to be made by Liverpool Victoria Friendly Society for the entire issued and to be issued share capital of the Company. Under the terms of the proposed offer, the shareholders of Highway Insurance Group will receive 73.35p per share in cash as well as an interim dividend of 1.65p per share with respect to the six months ended 30 June 2008."
In a separate statement, LV said: "LV believes that there is strong industrial logic to a combination of Highway and LV’s general insurance businesses. The acquisition will help to accelerate LV’s ambitions in the broker underwriting channel, adding scale and expertise as well as broadening the product range. The Enlarged Group will have a compelling proposition in the broker channel, with brokers benefiting from the Enlarged Group’s wider product range, enhanced operational scale and deeper financial resources."
“General insurance is central to LV's growth plans and our stated ambition is to become a top five insurer in our chosen markets by 2012
Mike Rogers, LV
Mike Rogers, group chief executive of Liverpool Victoria Friendly Society Limited, said: "General insurance is central to LV's growth plans and our stated ambition is to become a top five insurer in our chosen markets by 2012. This transaction has the potential to accelerate that aim, giving us considerably greater scale in the broker channel.
"Our general insurance management team has a strong track record of successfully acquiring and building businesses, and delivering value. Highway is highly complementary to our existing general insurance operations and will provide a strong platform for growth.
"This offer for Highway follows a series of strategic acquisitions we have made over the last couple of years, which have helped to transform the LV business overall and its future prospects."
Andrew Gibson, group chief executive of Highway Insurance Group, said: "This transaction represents an attractive financial result for Highway's shareholders.
“Highway and LV share important values, being strongly relationship driven and committed to technical and service excellence.
Andrew Gibson, Highway
"The Board also believes that this will be a good overall outcome for Highway's customers and employees. Highway and LV share important values, being strongly relationship driven and committed to technical and service excellence. The combined business will also have greater resources to capitalise on opportunities in the broader general insurance market."
In its interim results, Highway saw its profits before tax fall for the six months to 30 June 2008 fall to £1.4m, down from £11.8m at the same period last year. Gross written premiums also fell slightly to 130.7m, down from £131.2m.
The group's operating ratio was 98.5%, compared to 100.9% in the six month period last year. Net investment return was 0.4%, compared to 3.9% in its first half results in 2007.
Richard Gamble, chairman of Highway, said: "Although the result for the six months ended 30 June 2008 is disappointing when compared to previous years, we are pleased that our investment managers have protected capital during what has been a period of extreme conditions in financial markets in early 2008.
"The improvement in underwriting conditions that accelerated in the second half of 2007 has continued in 2008. Our underwriting and distribution businesses remain well positioned to take advantage of the upturn and the Board remains confident about the outlook for the business. We are therefore paying an interim dividend of 1.65p per share, the same as last year."