GRE will push up its US premium income by more than 25 per cent through taking over American Ambassador Casualty Company from the Allianz Group for dollars 100m in cash. The firm is based in Chicago and writes 'non-standard' auto business in Illinois, Indiana, Tennessee, Georgia and Florida.
A GRE spokesman said non-standard business was excluded from restrictive US legislation that keeps premiums down, so prices could be set at a level that made the business pay.
He added: 'It is extremely profitable business. We can charge the rates we need.'
GRE already has some experience of US non-standard business through its subsidiary, Globe American.
American Ambassador made an underwriting profit of pounds 2.5m last year and an overall pre-tax profit of pounds 11m on gross premium income of pounds 59m. It has produced an underwriting profit in each of the past five years.
Net assets were pounds 54m at the end of 1992, and GRE said it expected the company to contribute to earnings in the first year.
The purchase, to be funded from the British insurer's existing resources, will reduce GRE's net asset value by 1.5p a share, from 156p at the end of June, and the solvency ratio will fall 1.5 per cent to 53.5 per cent.
GRE described the deal as a niche purchase, part of a policy of gradual build-up in the US, mainly in the Midwest, over the last 10 years.
GRE's US premium income is pounds 200m, which is 9 per cent of worldwide premium income.
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