Tuesday, September 19, 2006

LONDON, England (Reuters): Omega Underwriting is set to move to Bermuda, the UK insurer said on Monday, joining peers including Catlin and Hiscox, highlighting concerns about London's ability to compete with the tax haven.

Omega, which announced a 10.2 percent increase in first-half pretax profit, also said it planned to raise 35 million pounds ($66 million) via a share placing to fund a new US subsidiary.

Omega is the second Lloyd's of London insurer in a week to announce a move to Bermuda to benefit from the island's lighter regulatory and tax regime. Hiscox, a leading Lloyd's underwriter, confirmed its plans last Monday.

Omega will operate under Bermudan holding company Omega Insurance Holdings with shares in the new firm to be listed on London's junior AIM market. It said the move, approved by UK authorities, was expected to be complete by mid-November.

"Establishing Omega US and operating in the future under a Bermudian holding company will position us to grow and develop our business significantly," Chief Executive Richard Tolliday said in a statement.

The UK's insurance giants are unlikely to follow in the footsteps of smaller players like Omega -- with a market capitalisation of around 168 million pounds -- while smaller peers may find costs outweigh the benefits.

But concerns that London-based insurers are at a competitive disadvantage have prompted the chairman of insurance market Lloyd's, Peter Levene, to call for lower corporate tax.

Key players in the City of London, including Lloyd's, are due to meet Treasury officials in the coming weeks as part of a high level group set up earlier this year to promote London as a leading financial centre.

A Treasury source said last week it was keeping an open mind on the tax issue.

Omega said its new US subsidiary, Omega US, backed by the fully underwritten placing and based in Delaware, would concentrate on insuring small to medium-sized policies in the United States.

The shares will be issued at 132 pence a share, it said. Its shares were trading on Monday at 139 pence at 1025 GMT, up 3.7 percent on the day.

Omega's first-half profit before tax totalled 4.8 million pounds, up from 4.4 million a year ago. It plans to pay a special interim dividend of 4.1 pence per share.

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