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6 August 2004

Penta funds PI Direct and Saturn merger to form the largest professional indemnity underwriting agency Group in the UK

PI Direct (“PID”), through the creation of a new holding company, is merging with Saturn Professional Risks (“Saturn”). The new holding company is owned by the management of both companies and new investors Penta Capital (“Penta”). Although both PID and Saturn will continue to operate independently, the new Group is now effectively the largest specialist professional indemnity underwriting agency in the UK, with combined gross written premium of £55 million.

Both PID and Saturn have been servicing the SME professional market in the UK for the last seven years, through different and largely separate regional broker channels. The Group is not only able to exploit the synergies between the two firms, but also will provide the Saturn brokers with access to PID’s solicitors and IFA capacity. Further, Saturn will utilise PID’s unique claims handling model allowing the Saturn brokers and insureds to benefit from in-house specialist PI solicitors. PID’s in-house solicitors handle claims through to trial where necessary and achieve considerable cost savings compared with conventional insurers, not only on saving external solicitors fees but also in resisting nuisance claims.

Together the two companies will service some 15,000 professional indemnity policyholders, an estimated 10% to 15% market share by number. Within this, the Group provides cover to approximately one third of the surveyors and estate agents in the UK. Directors estimate that this places the Group amongst the top five professional indemnity underwriters by number of risks. Additionally, it underwrites some 5% of the solicitors market by value and some 20% of the IFA market by value (through Magian Mutual).

The Group continues to benefit from the highest quality underwriting capacity support. PID and Saturn have a common capacity provider in Hiscox Insurance Company Limited (“Hiscox”), a subsidiary of Hiscox plc. Hiscox is both continuing the existing underwriting capacity arrangements and, in certain areas, extending its support of the combined entity. Hiscox will now provide 100% capacity for the Saturn book.

The holding company Board comprises the existing executive directors of both operations together with a representative from Penta. Saturn has 25 employees in Chesham, Buckinghamshire and PID has 65 staff located in Caveat House, London, EC3.

Michael Wood, Chief Executive of PID and the new holding company, says: “The combination of our two companies provides improved benefits to both brokers and SME professional indemnity buyers. The Saturn business will continue to be run as a separate operation in Chesham, but with the benefit of PID’s unique claims service model and the new products we can offer the Saturn brokers, such as our solicitors and IFA capacity.”

Mike Cant, Director of Saturn and Marketing Director of the new holding company, comments: “We have a great deal of respect for PID’s claims handling model and believe this will be of significant benefit to our brokers and insureds. Our brokers will also be able to access PID’s underwriting experience with solicitors and IFAs.”

Finance for the transaction was provided by Penta Capital and Bank of Scotland. PI Direct was advised on the transaction by Resolution Partners and Barlow Lyde & Gilbert.