BGN Entrepreneur

The City regulator is considering whether to force Pearl Group, part of the 73 billion pound investment empire run by Hugh Osmond the pizza-to-insurance entrepreneur, to reduce its debt of 2.25 bn pound at a time when concern is mounting about the financial stability of the insurance sector.
The Times has learnt that the FSA hired KPMG, to conduct an inquiry into Pearl, which took on a debt burden of at least 2.25 billion pound in the wake of its acquisition of Resolution plc, the closed life funds group previously owned by Clive Cowdery, the insurance entrepreneur. The FSA is considering the final report submitted by KPMG this month.
It is also investigating Mr Cowdery and four other former directors of Resolution over its 5 billion pound sale to Pearl. the FSA review of Pearl’s debt burden comes as the regulator maintains its heightened scrutiny of the financial strength of the UK’s leading quoted insurers, including Aviva, Prudential and Legal & General. The regulator has been concentrating on the amount of capital they hold to safeguard them against their debt and equity investments going wrong.
It is understood that the concerns about Pearl relat to the way that the company is structured. Pearl is UK’s biggest privately owned insurer and is part-owned by Sun Capital Partners, Mr Osmond’s investment vehicle. The FSA is believed to be comfortable with the level of debt in Pearl’s life insurance vehicles, but the Pearl parent company is carrying much higher levels of debt than listed rivals.
The FSA is understood to have asked KPMG to investigate whether there is a danger that the parent company could suck up cash from its subsidiaries to reduce its own debt, ultimately leaving policyholders short.
It was being suggested last night that the FSA’s investigation into the five former Resolution directors could be based on evidence uncovered by the team at KPMG. The FSA started its inquiry into Mr. Cowdery and others shortly after it received the accountancy firm’s report.
The City regulator has already investigated the Resolution salse once but took no action. The takeover battle for the company sparked tension between Mr. Osmond and Mr. Cowdery.

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