Buyout hastens Hafnia's demise: Candover Investments in pounds 13m deal for Economic Insurance Company

THE break-up of the ill-fated Hafnia insurance group of Denmark took another step yesterday with a pounds 13m management buyout of Economic Insurance Company, a Kent composite insurer that returned to profit this year, writes Peter Rodgers.

The deal, led by Candover Investments, gives the management under Peter Cullum a 20 per cent stake, with the balance held by Candover and Causeway Capital. Mr Cullum was brought in to reorganise Economic in 1991, before Hafnia failed.

The firm has several specialisations, including insurance for farm buildings, machinery and crops and a computer-based insurance package for owners of large portfolios of investment properties. The property package is marketed to managing agents and insurance brokers. Economic has also begun insuring holiday homes.

Mr Cullum said yesterday that pounds 11.5m of poor-quality business was cancelled as part of the reorganisation, taking premium income down to pounds 28m, but at the end of this year income is expected to be back to pounds 40m.

In 1992, Economic lost pounds 5.5m, but this year Mr Cullum is expecting a pre-tax profit of more than pounds 4m. A flotation is an option but not for some years, he added.

The company is a composite insurer with a life fund - currently totalling pounds 18m - but is to concentrate on developing its other business. No new life policies have been written since Hafnia transferred this activity to another of its subsidiaries.

Mr Cullum said there had been approaches to buy the life portfolio. A lot of money would have to be spent on new systems if Economic wanted to take new life business again.

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