Boardroom split at United Assurance after talks with Britannic break down

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The Independent Online
THE BOARD of United Assurance is heading for a split over the future of the beleaguered door-to-door insurance group, following the collapse of attempts by Britannic to lure it to the negotiating table last week.

Andrew Longhurst, the chairman of United, is believed to be unhappy at the reluctance of his chief executive Alan Frost to consider a pounds 3bn deal with Britannic and is pushing for the board to pursue the idea of finding a buyer for the group. Mr Frost, who is less than 18 months into the job, is arguing United has a viable independent and wants more time to provehis strategy can turn the group around.

United has tentatively explored the idea of closing its doors to new business and selling up to a vulture fund. Lord Rothschild's LAHC, which buysup life funds that have been closed to new business and put into run-off, is the name mentioned most often in City circles.

But the City is far from convinced that United has much option but to go back to Britannic, although some shareholders are keen for a much higher price than Britannic seems prepared to offer. United's price last Friday languished at 360p - well below embedded value for the group.

Britannic is understood to be still keen on a deal despite having announced last week that it has called off talks.

City sources say the statement was a formality required by the Takeover Code. Britannic was forced to go public after conversations with United shareholders leaked. Insiders saythere was some discussion between the companies' City advisers, but Britannic was unwilling to put a price on the table unless United provided more information than is publicly available.

One source said: "They did not want to have get into the position of having to go into due diligence, finding something nasty and then not being able to bid for 12 months. This way, they keep their options open."

Britannic is understood to be particularly concerned about United's state of preparedness for the year 2000 bug. United admitted earlier this year to problems with a new IT system it had introduced and is now suing Unisys, the supplier. However, it insists its legacy systems can cope with the millennium.

Britannic is expected to make an approach after United's preliminary results early in the new year. These are likely to yield more information on issues which Britannic wanted clarifying, include the readiness of United's sales force to cope with new tougher Financial Services Authority regulations and the state of discussions with the FSA about unlocking so-called orphan assets.