Noble two-pronged attack on tax

FEARS that the new Lloyd's corporate capital companies will not qualify for tax benefits has prompted Noble & Co, an Edinburgh corporate financier, to promote a complicated two-company structure as its solution to provide limited liability money to the beleaguered insurance market.

Tim Noble, Noble's chief executive, said it was uncertain whether a company that had subsidiaries underwriting at Lloyd's would be able to qualify for the capital gains tax exemption of an investment trust.

Sedgwick, the leading insurance broker, and Barclays de Zoete Wedd are planning an investment trust called CLM Insurance Fund. Mr Noble said he would prefer to avoid the risk of being left red- faced by an adverse ruling from the Inland Revenue.

Noble therefore plans to launch two listed companies, Premium Trust and Premium Underwriting, with a combined capital of between pounds 27m and pounds 30m. The money will be split 60-40 between the two.

With this structure Noble can be confident that Premium Trust will gain investment trust status.

Premium Underwriting will lend the bulk of its money to Premium Trust in return for an undertaking that Premium Trust will pledge up to pounds 28m to Lloyd's.

Premium Trust will then be a geared investment trust and Premium Underwriting will be able to underwrite up to pounds 56m of premiums in 1994.

Shares in the two companies, which will have a 10-year life, will be offered as units.

Assuming the 10 per cent return on underwriting that Lloyd's is aiming for, Noble believes Premium Underwriting could pay a gross yield of more than 20 per cent and Premium Trust could pay more than 11 per cent.

SG Warburg is forming New London Capital, a listed investment company, to participate as a corporate Lloyd's name.