Willis Corroon quits Gryphon: Sale of stake for pounds 33m marks broker's final break with underwriting business

WILLIS CORROON, the insurance broking group, will receive about pounds 33m from the sale of a 55 per cent stake in Gryphon Holdings, its US underwriting business.

Gryphon is being floated off through an initial public offering in the US and Canada. The 4.5 million shares were priced at dollars 13, at the bottom end of Willis Corroon's expectations.

Peter Stevens, a Willis Corroon spokesman, said the company was pleased to have got the sale away. The US insurance sector has underperformed badly recently, and several insurers have had to cancel planned share offers.

The sale of Gryphon will complete Willis Corroon's withdrawal from insurance underwriting; it has already discontinued its UK business. Willis Corroon cannot sell the bulk of its remaining holding for another nine months.

The underwriters to the offering - Smith Barney Shearson, Goldman Sachs and Lehman Brothers - have an option to take up another 8.3 per cent of Gryphon's share capital should it be needed to meet demand from investors.

Gryphon's businesses are the Los Angeles-based Associated International Insurance Company, and the Pennsylvania-based Calvert.

They both provide specialist cover for small and medium-sized companies.

Gryphon contributed pounds 9.9m of Willis Corroon's pounds 68.2m of pre-tax profits last year.

Mr Stevens said Willis Corroon would use the proceeds from the sale to return debt to more manageable levels. Gross debt was recently stated to be pounds 163m.

Kevin Ryan, insurance analyst at Panmure Gordon, said it made sense for Willis Corroon to withdraw from underwriting. 'At the end of the day, who wants a small insurance company? Particularly out there where anybody would say it is becoming more and more difficult to do business as an insurer,' he said.

Mr Ryan is forecasting that Willis Corroon will make pounds 76m of profits this year and pounds 87m next year. He said: 'I think there's a feeling that after such a pitiful performance from the sector in general, things have got to get better.'

However, there is still little sign of the long-awaited increase in US premium rates. Brokers are therefore having to concentrate on controlling costs and maximising investment income.

Mr Stevens said Willis Corroon was not seeing any major change in its markets, and was not planning or depending on any improvement. He said the UK market looked pretty flat.