Venerable life assurer in secret talks with buyout firm

Mutual founded in 1852 is keen to expand – but a sell-out would be controversial
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The Independent Online

One of the oldest names in British life insurance could fall into the hands of a City private equity house in a deal that might prove controversial for both regulators and members.

MGM Advantage, founded in 1852, has been up for sale for months, with bankers at Evercore scouring the financial district for buyers.

MGM is said to need a cash injection to bolster its financial strength and allow it to expand its annuities business. The more traditional pensions and savings arm could then be closed to new business.

Sources close to the process say that several possible bidders have fallen away, leaving only TDR Capital still in the running.

TDR is the private equity house set up by Manjit Dale and Stephen Robertson in 2002. The pair previously built up DB Capital Partners into one of the leading buyout firms in Europe.

While regarded as among the shrewdest operators in the business, some bankers question whether they would be the right owners for a mutual insurer that has its origins in marine insurance and exists to pay profits to its 17,000 members.

TDR's website says: "Our strategy is to identify and invest in a limited number of companies with characteristics that suit our approach. We are single-minded in our pursuit of opportunities that provide scope to create value through a combination of operational improvements and innovative financing."

Several other leading private equity firms took a close look at MGM, including the US giant Blackstone, before deciding not to bid, sources say.

One banking source said: "They are trying to create a new company, but they will need approval from members and from the Financial Services Authority. It is not straightforward."

It is highly unlikely that the members would get a windfall should any deal go through.

Once known as the Marine and General Mutual Life Assurance Society, it has assets of £1.9bn. The chief executive, Chris Evans, said recently that the firm is growing quickly in annuities "and we want to be able to continue that growth". He added that "the board is considering a whole range of different options".

In particular, the insurer thinks that the market for so-called "Enhanced Annuities" that pay higher pensions to people with lower life expectancy is a growth area.

MGM is said to be seeking £200m in fresh equity, but may have to settle for less.

The society has its origins in marine insurance. It was set up to offer life assurance to seamen who didn't drink alcohol.

MGM has 250 staff at offices in Worthing, West Sussex. It celebrated its 160th birthday a few weeks ago.

MGM declined to comment yesterday.

MGM: A long voyage

* Founded in 1852, making it Britain's longest-registered company. Its holds the company reg number 00000006[2].

* Set up to offer life insurance to seamen who did not drink alcohol, in the days when drinking water was regarded as dangerous and so teetotallers were charged more for insurance.

* This anomaly prompted the creation of the United Kingdom Temperance and General Provident Association in 1841, the brain-child of the teetotal Robert Warner.

* Then the Marine Life and Casualty Mutual Assurance Society, it moved "to extend the benefits of Life Assurance to all (whether Mariners or Passengers) who have to undergo the perils of the ocean".

* Its first meeting was at the offices of the Peninsular & Oriental Steam Navigation Company in Leadenhall Street on 20 January 1852.