Castelnau Group Regulatory News (CGL)

30 Oct 2006 07:02

Catlin Group Limited30 October 2006 Not for release, publication or distribution, in whole or in part, in, into orfrom Australia, Canada or any other jurisdiction where to do so would constitutea violation of the relevant laws of such jurisdiction RECOMMENDED OFFER BY CATLIN GROUP LIMITED FOR WELLINGTON UNDERWRITING PLC SUMMARY The Boards of Catlin and Wellington are pleased to announce the terms of arecommended Offer to be made by Catlin for the whole of the issued and to beissued share capital of Wellington. • Wellington Shareholders to receive 0.17 New Catlin Shares and 35 pence in cash for each Wellington Share. A Mix and Match Facility will also be available • Offer values each Wellington Share at approximately 121 pence and the existing issued share capital of Wellington at £591 million, based on the closing middle market price of Catlin on 27 October 2006, being the last Business Day prior to this Announcement • Offer represents a premium for Wellington Shareholders of approximately 25 per cent. to the closing middle market price of Wellington on 23 October 2006, being the last Business Day prior to the announcement that Catlin and Wellington were in discussions • Offer also represents a premium for Wellington Shareholders of approximately 31 per cent. to the average Wellington Share price over the one month period prior to 24 October 2006, being the Business Day of the announcement that Catlin and Wellington were in discussions • Wellington Shareholders will own approximately 34 per cent. of the Enlarged Group. The Offer has been structured to enable Wellington Shareholders to enjoy the benefits that will flow from the transaction as continuing shareholders in the Enlarged Group • Acquisition will create a major international specialty property and casualty insurer with gross premiums of approximately $2.4 billion and a pro forma market capitalisation of approximately £1.3 billion • Catlin will become the largest underwriting operation at Lloyd's, will be a leading player in Bermuda and will have a strong platform to accelerate the development of its US business • Stephen Catlin will be CEO of the Enlarged Group; key Wellington executives will be an integral part of the Enlarged Group's management team • Catlin's total 2006 dividend is expected to be increased to 23 pence a share. Represents full year increase of 48 per cent. for Catlin Shareholders; rebased Catlin dividend will also provide significant income uplift to Wellington Shareholders - implied pro forma uplift of 37 per cent. on 2005 dividend • Acquisition expected to be earnings neutral in 2007 (after restructuring charges) and significantly earnings enhancing in 2008 and beyond(1). Expected post-tax synergies from the combination of $70 million, to be achieved in full by 2008 • Application to be made to Lloyd's by Wellington for permission to cease Syndicate 2020 with effect from 31 December 2006, with the capital provided by Wellington Corporate Members to that syndicate being made available to support Catlin's Syndicate 2003 for the 2007 year of account. Compensation will be paid to unaligned members for the cessation of Syndicate 2020 if the Cessation Application is approved. The Cessation Application is expected to be determined by early December 2006 The Offer will be implemented by way of a recommended offer by Catlin forWellington and will be conditional on, inter alia, the approval of CatlinShareholders and the satisfaction of relevant regulatory conditions. The Board of Catlin intends unanimously to recommend that Catlin Shareholdersvote in favour of the Acquisition at the Special General Meeting and the Boardof Wellington intends unanimously to recommend that Wellington Shareholdersaccept the Offer. Wellington's Directors have given Catlin irrevocableundertakings to accept the Offer in respect of their own Wellington Shares. The Acquisition is expected to complete by 31 December 2006. Commenting on the Offer, Stephen Catlin, Chief Executive of Catlin, said: "The combination of our two complementary businesses will create substantialvalue for both Catlin and Wellington shareholders. In London, the enlarged syndicate will be the largest at Lloyd's in terms ofstamp capacity with substantial strength across key sectors of the market. Inthe US, our operations form a natural fit and the Acquisition will accelerateour announced US expansion. At the same time, we have identified substantialsynergies in reinsurance, tax, operations and investments, which will benefitearnings in 2008 and beyond. The combination further diversifies our underwriting portfolio, fulfilling ourobjective of seeking uncorrelated risk. We look forward to the opportunitiesthat this expansion will bring." Commenting on the Offer, Preben Prebensen, Chief Executive of Wellington, said: "The combination with Catlin accelerates Wellington's planned entry into theBermuda market and facilitates a restructuring of our relationship with thirdparty capital providers without recourse to shareholders, whilst at the sametime creating a group with the scale, diversity and depth of talent to competeon a global stage." John Barton, Chairman of Wellington, said: "We believe that the Offer is attractive for Wellington Shareholders. Havingcarefully considered the proposed Offer terms and the plans for the EnlargedGroup, we are confident that the Offer will deliver more certain and greatervalue to Wellington Shareholders than our stand-alone strategic plans." This summary should be read in conjunction with and is subject to the full textof the attached Announcement (including the Appendices). The Offer, when made,will be subject to the Conditions and Further Terms set out in Appendix I andthe terms and conditions to be set out in the Offer Document when issued. The sources and bases of information contained in this Announcement are set outin Appendix II and the definitions of certain expressions used in thisAnnouncement are set out in Appendix III. A presentation to analysts will be held today at 09:00 AM at Catlin's Londonoffices (3 Minster Court, Mincing Lane, London EC3R 7DD). A copy of thepresentation will be available on www.catlin.com in due course. ENQUIRIES For further information, contact: CatlinJames Burcke (Head of Communications, London)Tel: +44 (0)20 7458 5710Mobile: +44 (0)7958 767738Email: james.burcke@catlin.com William Spurgin (Head of Investor Relations, London)Tel: +44 (0)20 7458 5726Mobile: +44 (0)7710 314365Email: william.spurgin@catlin.com JPMorgan CazenoveSole financial adviser and joint corporate broker to CatlinTel: +44 (0)20 7588 2828Tim WiseRobert ThomsonConor Hillery UBS Investment BankJoint corporate broker to CatlinTel: +44 (0)20 7567 8000Phil Shelley MaitlandPublic relations adviser to CatlinLiz MorleyNeil BennettTel: +44 (0)20 7379 5151Email: emorley@maitland.co.uk WellingtonTel: +44 (0)20 7337 2000Preben Prebensen (Chief Executive) Lexicon PartnersSole financial adviser to WellingtonTel: +44 (0)20 7653 6000Angus WintherJames Viggers Citigroup Global MarketsSole corporate broker to WellingtonTel: +44 (0)20 7986 4000Andrew Thompson Financial DynamicsPublic relations adviser to WellingtonTel: +44 (0)20 7269 7200Rob BailhacheGeoffrey Pelham-Lane Note: 1. The statements that the Acquisition will be earnings enhancing do notconstitute a profit forecast and should not be interpreted to mean that theearnings per share in the first full financial year following the Acquisition,or in any subsequent period, would necessarily match or be greater than thosefor the relevant preceding financial year. JPMorgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Catlin and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Catlin for providing the protections afforded to clients of JPMorganCazenove or for providing advice in relation to the Offer, the contents of thisAnnouncement, or any matter referred to herein. UBS Limited, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Catlin and no one elsein connection with the Offer and will not be responsible to anyone other thanCatlin for providing the protections afforded to clients of UBS Limited or forproviding advice in relation to the Offer, the contents of this Announcement, orany matter referred to herein. Lexicon Partners, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Wellington and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Wellington for providing the protections afforded to clients of LexiconPartners or for providing advice in relation to the Offer, the contents of thisAnnouncement, or any matter referred to herein. Citigroup Global Markets, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively forWellington and no one else in connection with the Offer and will not beresponsible to anyone other than Wellington for providing the protectionsafforded to clients of Citigroup Global Markets or for providing advice inrelation to the Offer, the contents of this Announcement, or any matter referred to herein. This Announcement does not constitute, or form part of, any offer for orinvitation to sell or purchase any securities, or any solicitation of any offerfor, securities in any jurisdiction. Any acceptance or other response to theOffer should be made only on the basis of information contained in or referredto in the Offer Document and the Prospectus which Catlin intends to despatchshortly to Wellington Shareholders. Such documents will contain importantinformation which Wellington Shareholders are urged to read carefully. The release, publication or distribution of this Announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this Announcement is released, published or distributedshould inform themselves about and observe such restrictions. Further, the lawsof the relevant jurisdiction may affect the availability of the Offer (includingthe Mix and Match Facility) to persons not resident in the United Kingdom.Persons who are not resident in the United Kingdom, or who are subject to thelaws of any jurisdiction other than the United Kingdom should inform themselvesabout, and observe, any applicable requirements. Further details in relation tooverseas shareholders will be contained in the Offer Document and theProspectus. The information contained herein is not for publication or distribution into theUnited States. The material set forth herein is for information purposes onlyand should not be construed as an offer for securities for sale in or into theUnited States or any other jurisdiction. The New Catlin Shares to be issued inconnection with the Offer have not been, nor will they be, registered under theUS Securities Act of 1933, as amended, or under the securities laws of any stateof the United States of America and may not be offered or sold in the UnitedStates of America, absent registration or an applicable exemption fromregistration. No public offering of the securities will be made in the UnitedStates of America. The relevant clearances have not been, and will not be,obtained from the securities commission of any province or territory of Canada;no Prospectus or a Prospectus equivalent has been, or will be, lodged with, orregistered by, the Australian Securities and Investments Commission and the NewCatlin Shares have not been, nor will they be, registered under or offered incompliance with applicable securities laws of any state, province, territory orjurisdiction of Canada or Australia. Accordingly, Catlin Shares may not (unlessan exemption under relevant securities laws is applicable) be offered, sold,resold or delivered, directly or indirectly, in or into Canada or Australia orany other jurisdiction outside the United Kingdom if to do so would constitute aviolation of the relevant laws of, or require registration thereof in, suchjurisdiction or to, or for the account or benefit of, a person located in Canadaor Australia or such other jurisdiction. This Announcement, including information included or incorporated by reference,may contain a number of forward-looking statements relating to Catlin andWellington with respect to, among others, the following: financial condition;results of operation; the businesses of Catlin and Wellington; future benefitsof the transaction; and management plans and objectives. Catlin and Wellingtonconsider any statements that are not historical facts to be "forward-lookingstatements". These forward-looking statements involve a number of risks anduncertainties that could cause actual results to differ materially from thosesuggested by them. Important factors that could cause actual results to differmaterially from estimates or forecasts contained in the forward-lookingstatements include, among others, the following possibilities: future revenuesare lower than expected; costs or difficulties relating to the combination ofthe businesses of Catlin and Wellington, or of other future acquisitions, aregreater than expected; expected cost savings from the transaction or from otherfuture acquisitions are not fully realised or not realised within the expectedtime frame; competitive pressures in the industry increase; general economicconditions or conditions affecting the relevant industries, whetherinternationally or in the places Catlin and Wellington do business are lessfavourable than expected, and/or conditions in the securities market are lessfavourable than expected. The estimated operational cost savings and financial synergies have beencalculated on the basis of the existing cost and operating structures of thecompanies and by reference to current prices and the current regulatoryenvironment. These statements of estimated cost savings relate to future actionsand circumstances which, by their nature, involve risk, uncertainties and otherfactors. Because of this, the cost savings and financial synergies referred tomay not be achieved, or those achieved could be materially different from thoseestimated. These statements should not be interpreted to mean that the earningsper share in the first full financial year following the Acquisition, or in anysubsequent period, would necessarily match or be greater than those for therelevant preceding financial period. Catlin Shareholders and Wellington Shareholders should note that the priorconsent of the Financial Services Authority and Lloyd's (and potentially otherregulatory authorities in jurisdictions in which the Catlin Group and/or theWellington Group conduct their business) will be required for any person eitheralone or with their associates to hold or control, directly or indirectly, 10per cent. or more of Catlin's common issued share capital following theAcquisition, as that person will be regarded as a "controller" of the regulatedinsurance entities in the Enlarged Group. In order to obtain such consents, therelevant person will be required to provide certain information to the FinancialServices Authority, Lloyd's or other regulatory bodies (as applicable) and maybe required to give certain undertakings in respect of its interest. If therelevant person fails to obtain such consent, the Catlin Board may invokeprovisions contained in Catlin's byelaws which may result in some or all of theshares in Catlin (including the New Catlin Shares) held by such person ceasingto carry the right to vote or in the person being required to sell some or allof its shares in Catlin. Shareholders should also be aware that the FinancialServices Authority may exercise the powers conferred on it by section 189 of theFSMA and may impose criminal sanctions under section 191 of the FSMA. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers, ifany person is, or becomes, "interested" (directly or indirectly) in 1 per cent.or more of any class of "relevant securities" of Catlin or of Wellington, all"dealings" in any "relevant securities" of that company (including by means ofan option in respect of, or a derivative referenced to, any such "relevantsecurities") must be publicly disclosed by no later than 3.30 pm (London time)on the business day following the date of the relevant transaction. Thisrequirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is withdrawn or until the"offer period" otherwise ends. If two or more persons act together pursuant toan agreement or understanding, whether formal or informal, to acquire an"interest" in "relevant securities" of Catlin or Wellington, they will be deemedto be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Catlin or of Wellington by Catlin or Wellington, or by any oftheir respective "associates", must be disclosed by no later than 12.00 noon(London time) on the business day following the date of the relevanttransaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. Not for release, publication or distribution, in whole or in part, in, into orfrom Australia, Canada or any other jurisdiction where to do so would constitutea violation of the relevant laws of such jurisdiction RECOMMENDED OFFER BY CATLIN GROUP LIMITED FOR WELLINGTON UNDERWRITING PLC 1. Introduction The Boards of Catlin and Wellington are pleased to announce the terms of arecommended Offer to be made by Catlin for the whole of the issued and to beissued share capital of Wellington. 2. The Offer The Offer, which will be subject to the Conditions and Further Terms set out inAppendix I, and to the terms and conditions to be set out in the Offer Documentand Form of Acceptance and Election, will be made on the following basis: 0.17 New Catlin Shares and 35 pence in cash for each Wellington Share. The Offer: • values each Wellington Share at approximately 121 pence and the existing issued share capital of Wellington at £591 million based on the closing middle market price of Catlin on 27 October 2006, being the last Business Day prior to this Announcement; • represents a premium for Wellington Shareholders of approximately 25 per cent. to the closing middle market price of 97.25 pence per Wellington Share on 23 October 2006, being the last Business Day prior to the announcement that Catlin and Wellington were in discussions; and • represents a premium for Wellington Shareholders of approximately 31 per cent. to the average Wellington Share price over the one month period prior to 24 October 2006, being the Business Day of the announcement that Catlin and Wellington were in discussions. Full acceptance of the Offer, assuming no options existing under the WellingtonShare Schemes are exercised, would result in the issue of up to approximately 83million New Catlin Shares representing approximately 34 per cent. of the issuedcommon share capital of Catlin as enlarged by the Acquisition. In addition,Wellington Shareholders will receive cash consideration, in aggregate, ofapproximately £170 million. The consideration in the form of New Catlin Shares will allow WellingtonShareholders to participate in future value creation and dividends payable bythe Enlarged Group, including the benefit of cost and revenue synergies nototherwise available to Wellington Shareholders as a stand-alone business. A Mix and Match Facility will be available to Wellington Shareholders pursuantto which Wellington Shareholders may, subject to availability, elect to vary theproportions in which they receive New Catlin Shares and cash in respect of theirholdings of Wellington Shares. Further details of the Mix and Match Facility areset out in paragraph 6 below. The Offer is final and will not be increased, except that Catlin reserves theright to increase the Offer if any third party announces a firm intention tomake an offer for Wellington. Applications will be made for the New Catlin Shares to be admitted to theOfficial List and to trading on the London Stock Exchange's market for listedsecurities. The Wellington Shares will be acquired by Catlin pursuant to the Offer fullypaid and free from all liens, charges, equitable interests, encumbrances,pre-emptive rights and other third party rights and interests of any naturewhatsoever and together with all rights now and hereafter attaching thereto,including the right to receive and retain all dividends and other distributions(if any) declared, made or paid after the date of this Announcement. For theavoidance of doubt, the interim dividend of 1.6 pence per Wellington Sharepayable in respect of the six months ended 30 June 2006 will remain payable toWellington Shareholders on the register as at the close of business on 15September 2006. When made, the Offer will be subject to the Conditions and Further Terms and tothe further terms and conditions to be set out in the Offer Document and Form ofAcceptance and Election including, inter alia, (i) the approval of CatlinShareholders at the Special General Meeting, (ii) the admission of the NewCatlin Shares to the Official List becoming effective in accordance with theListing Rules and to trading on the London Stock Exchange's market for listedsecurities becoming effective in accordance with the Admission and DisclosureStandards and (iii) the receipt of certain regulatory consents from theFinancial Services Authority, Lloyd's and other regulatory bodies. Further details of the bases and sources of certain information set out in thisAnnouncement are contained in Appendix II. 3. Background to and Reasons for the Offer Catlin and Wellington's existing businesses are a strong complementary fit andthe Acquisition is expected to bring material benefits to both businesses. TheEnlarged Group will be a major international specialty insurance business withwell established underwriting platforms in the United Kingdom and Bermuda and asignificantly enhanced underwriting and distribution platform in the US. Both businesses have strong operational and underwriting expertise which will befurther strengthened and diversified through the combination. While both Catlinand Wellington have among the largest Lloyd's syndicates, Catlin has a welldeveloped Bermuda platform - an area where Wellington has plans to expand. Inthe US, Wellington has a growing business generating approximately $280 millionin gross premiums written in 2006 which will accelerate Catlin's existing plansto develop in that market. The combination therefore creates the opportunity forboth significant cost savings and revenue growth. Each of Catlin's fouroperating platforms - Lloyd's, Bermuda, US and Catlin UK - will be strengthenedas a result of the Acquisition. In particular, the Catlin Board believes that the Acquisition will provide thefollowing benefits: Major enhancement of Catlin's operating platforms • Catlin will become the largest underwriting operation at Lloyd's based on 2007 combined stamp capacity of up to £1.25 billion • The enlarged Catlin US will have pro forma gross premiums written in 2006 in excess of $300 million • Catlin Bermuda will grow through increased intercompany reinsurance cessions and further underwriting opportunities • Catlin UK will develop further through writing business classes also currently underwritten by Wellington Accelerates development of Catlin's US business • Acquisition of Wellington advances Catlin's existing expansion plans in the US by approximately two years • Acquisition will enhance management, underwriting staff and range of products • Catlin's US expense ratio will be significantly lowered for 2007/8 Further diversifies and strengthens Catlin's underwriting operations • Combination will broaden Catlin's already diversified underwriting portfolio • Additional non-catastrophe related risk added to the portfolio • Wellington brings strong reputation for underwriting skill • Addition of underwriting talent will bolster Catlin's team Strengthens Catlin's balance sheet • Greater financial resources will be a positive factor for clients, brokers and shareholders • Gross assets under management increase 82 per cent. to $4.5 billion • Tangible net asset value increases 29 per cent. to $1.3 billion • Total net asset value increases 73 per cent. to $1.9 billion Expected to deliver significant synergy benefits • Expected post-tax synergies from the combination of $70 million, to be achieved in full by 2008; a restructuring charge of approximately $20 million pre-tax is expected to be incurred in 2007 • Reinsurance synergies expected due to greater diversification and therefore reduced insurance need, and economies of scale • Significant tax synergies expected through maintenance of capital in Catlin Bermuda, resulting in an anticipated Catlin Group tax rate not exceeding 15 per cent. • Operating synergies expected to stem from scale efficiencies including information technology, professional services and office costs • Investment synergies expected as a result of increased portfolio size and reduced investment management fee rates 4. Financial Effects on Catlin The Acquisition is expected to be earnings neutral for Catlin in 2007 (afterrestructuring charges) and significantly earnings enhancing in 2008 and beyond(1). 5. Dividend Policy The Board of Catlin expects to declare a 2006 final dividend of 17 pence,bringing the full year 2006 dividend to 23 pence per Catlin Share. Thisrepresents an increase of 48 per cent. on the full year 2005 dividend paid toCatlin Shareholders. The New Catlin Shares will qualify for the 2006 final dividend which is expectedto be paid to shareholders of the Enlarged Group in May 2007. The rebaseddividend will deliver significant income uplift to Wellington Shareholders.Taking account of the terms of the Offer, Wellington Shareholders would havebenefited from a pro forma income uplift of 37 per cent. on their full year 2005dividend at Catlin's rebased 2006 level. The Board of Catlin anticipates that the dividend will grow over time from thisrebased level of 23 pence. The rebasing is driven by the expected enhancement toCatlin's earnings as a result of the Acquisition and signals the Catlin Board'sconfidence in the Catlin Group's outlook. Catlin remains committed to providing an attractive return to shareholdersthrough the dividend and will continue to adopt its current policy under whichpayments are linked to recent trends in the performance of the Catlin Group andits future prospects. 6. Mix and Match Facility Wellington Shareholders (other than certain overseas persons) who validly acceptthe Offer will be entitled to elect, subject to availability, to vary theproportions in which they receive New Catlin Shares and cash in respect of theirholdings of Wellington Shares. However, the total number of New Catlin Shares tobe issued and the maximum aggregate amount of cash to be paid under the Offerwill not be varied as a result of elections under the Mix and Match Facility.Accordingly, satisfaction of elections made by Wellington Shareholders under theMix and Match Facility will depend on the extent to which other WellingtonShareholders make offsetting elections. Satisfaction of elections under the Mixand Match Facility will be effected on the basis of 508.5 pence in cash (beingthe closing middle market price of a Catlin Share on 27 October 2006, being thelast Business Day prior to this Announcement) for each New Catlin Share (andvice versa). To the extent that elections cannot be satisfied in full, they willbe scaled down on a pro rata basis. As a result, Wellington Shareholders whomake an election under the Mix and Match Facility will not necessarily know theexact number of New Catlin Shares or the amount of cash they will receive untilsettlement of the consideration due to them in respect of the Offer. The Mix andMatch Facility is conditional upon the Offer becoming or being declaredunconditional in all respects. Elections under the Mix and Match Facility will not affect the entitlements ofthose Wellington Shareholders who do not make any such elections. Further details in relation to the operation of the Mix and Match Facility willbe contained in the Offer Document and the related Form of Acceptance andElection. 7. Information on Wellington Wellington is the holding company of an international insurance and reinsurancegroup which is listed on the London Stock Exchange. Wellington was establishedin its current form in November 1996, following the merger of WellingtonUnderwriting Holdings Limited with Wellington. The core of the WellingtonGroup's business is in the Lloyd's insurance market where the Wellington Groupmanages and underwrites a diversified book of insurance and reinsurancebusiness. The Wellington Group currently conducts its underwriting activities through: • the management by WUAL of Syndicate 2020, and its participation on Syndicate 2020 through the Wellington Corporate Members. The Wellington Group's participation on Syndicate 2020 amounted to 56 per cent. for the 2004, 66 per cent. for the 2005 and 67 per cent. for the 2006 years of account. Participation for the 2007 year of account was, prior to this Announcement, expected to increase to 70 per cent. • WUI, an underwriting agency in the United States of America which underwrites or introduces insurance and reinsurance business to Syndicate 2020 • WSIC, a non-admitted excess and surplus lines carrier in the United States of America which writes direct casualty and non-catastrophe property business for small commercial specialty risks in the United States of America and which has an AM Best rating of A- (Excellent) Syndicate 2020 has premium income capacity of £800 million for the 2006 year ofaccount and, prior to this Announcement, was expected to have premium incomecapacity of £850 million for the 2007 year of account. Syndicate 2020underwrites a diverse book of business which includes exposures from around theworld in the following areas: accident and health, aviation, energy, liability,marine and war, property and reinsurance risks. Syndicate 2020 benefits from theLloyd's market ratings of A (Excellent) by AM Best and A (Strong) from Standard& Poor's. Wellington's strategy is to create a specialist insurance and reinsurance groupwith a substantial presence both inside and outside the Lloyd's market.Wellington's strategic priorities are to: • deliver strong performance from the Wellington Group's underwriting operations • grow the Wellington Group's competitive advantage in the United States of America • add to the Wellington Group's participation on Syndicate 2020, provided the terms meet the Wellington Group's economic objectives • continue to explore the development of additional trading platforms that would bring clear advantages when combined with the Wellington Group's existing Lloyd's franchise and US operations For the year to 31 December 2005, the Wellington Group reported gross writtenpremiums of £523.4 million, a post-tax loss (on an IFRS basis) of £13.7 million,primarily as a result of the impact of the 2005 US Hurricanes, and declared afull year dividend of 4.0 pence per Wellington Share. For the six months to 30June 2006, the Wellington Group reported gross written premiums of £357.7million, profits after tax (on an IFRS basis) of £17.6 million and declared aninterim dividend of 1.6 pence per Wellington Share payable in respect of the sixmonths ended 30 June 2006 to Wellington Shareholders on the register as at 15September 2006. As at 30 June 2006, the Wellington Group had total shareholders'equity of £358.2 million, equivalent to 74.3 pence per Wellington Share. Wellington also has an investment in Aspen Insurance Holdings Limited ("Aspen")which is a Bermuda based insurance holding company with operations in theinsurance and reinsurance markets in London, Bermuda and the United States ofAmerica. As previously announced, Wellington is progressively reducing its Aspenholding, which now amounts to approximately 1 million Aspen shares (representingapproximately 1.1 per cent. of Aspen's issued share capital) and options toacquire approximately 3.8 million further Aspen shares (representingapproximately 3.6 per cent. of Aspen's issued share capital and, together withWellington's shareholding referred to above, approximately 4.5 per cent. ofAspen's share capital on a fully diluted basis). 8. Information on Catlin Established in 1984, Catlin is an international specialist property and casualtyinsurer and reinsurer, writing more than 30 classes of business from fourunderwriting platforms: • the Catlin syndicate at Lloyd's (Syndicate 2003), which is one of the largest syndicates at Lloyd's based on 2006 premium capacity of £450 million. The Catlin syndicate is a recognised leader of numerous classes of specialty insurance and reinsurance • Catlin Bermuda (Catlin Insurance Company Ltd.), which underwrites property treaty and casualty treaty reinsurance and property and casualty insurance. Catlin Bermuda also provides reinsurance support for other Catlin underwriting platforms • Catlin UK (Catlin Insurance Company (UK) Ltd.), which specialises in underwriting commercial non-life insurance for UK clients. It also writes other classes of business written by the Catlin syndicate • Catlin US, which encompasses all of Catlin's operations in the United States of America. Catlin US includes Catlin Insurance Company Inc., an admitted US insurer which will commence operations soon, along with underwriting offices in Atlanta, New York, Houston, New Orleans and San Francisco Catlin also operates offices worldwide which allow Catlin underwriters to workclosely with local policyholders and brokers. The offices are located in Canada(Toronto and Calgary), Australia (Sydney), Singapore, Malaysia (Kuala Lumpur),Hong Kong, Germany (Cologne), Belgium (Antwerp) and Guernsey. Catlin UK hasregional offices in Glasgow, Leeds, Derby, Birmingham, Watford and Tonbridge. Throughout its history, Catlin has emphasised a firm commitment to underwritingdiscipline as well as a thorough understanding of clients' needs. A forwardlooking approach to managing underwriting cycles and the ability to designprogrammes tailored specifically for individual policyholders are among Catlin'shallmarks. The Catlin syndicate, Catlin Bermuda and Catlin UK have financial strengthratings of A (Excellent) from AM Best Company. Catlin Bermuda and Catlin UK haveinsurance financial strength ratings of A- (Strong) from Standard & Poor's; theCatlin syndicate has a Lloyd's Syndicate Assessment of 4- (Low Dependency) fromStandard & Poor's. For the year to 31 December 2005, the Catlin Group reported net income andprofits before tax on a US GAAP basis of $19.7 million and $27.7 millionrespectively and wrote gross premiums of $1,386.6 million. For the half year to30 June 2006, the Catlin Group reported record net income and profits before taxon a US GAAP basis of $147.3 million and $167.4 million respectively and wrotegross premiums of $903.1 million. As at 30 June 2006 the Catlin Group hadstockholders' equity of $1,091.2 million. As at 27 October 2006, Catlin had a market capitalisation of approximately £833million. 9. Current Trading and Prospects Wellington Wellington released its interim results for the six months to 30 June 2006 on 31August 2006. The rate increases experienced in the hurricane exposed classesearly in the year have continued as a result of tightening capacity andsignificant rate increases for reinsurance programmes renewed over the course ofthe year. The Wellington Group has benefited from this shift in the marketthroughout the year in both its direct and reinsurance classes of business whileclosely managing exposures. As at 30 September 2006, the Wellington Group's rateindices showed a total rate increase on new and renewed business of 16 per cent.for the first nine months of 2006, across all lines of business, of which 3 percent. was related to non-hurricane exposed classes of business which is withinthe Wellington Group's expectations. Catastrophe exposed lines have increasedmore markedly, driving the majority of the overall rate increase. Syndicate 2020remains on track to write approximately $1.7 billion (£905 million) of grosswritten premiums in 2006 and, prior to this Announcement, its underwritingcapacity was expected to increase for the 2007 year of account. Wellington's US operations (WUI and WSIC) remain on track to underwrite orintroduce approximately $280 million of gross written premium in 2006 (of whichapproximately $230 million is business underwritten or introduced to Syndicate2020 by WUI and approximately $50 million is business written by WSIC). This isexpected to grow further in 2007. Trading conditions, loss experience and cash flow within Syndicate 2020 havebeen, to date, in line with or better than the Wellington Board's expectations.As at the date of this Announcement, although still exposed to catastrophe risk,the Wellington Group is not aware of any significant catastrophe losses havingoccurred in 2006 to date which would be likely to have a material impact onunderwriting results and loss experience for non-catastrophe classes of businesshas been in line with or better than the Wellington Board's assumptions in theperiod to 30 September 2006. The Wellington Group recently completed itsquarterly internal review of Syndicate 2020's loss reserves as at 30 September2006, which indicate no material change in respect of 2005 and prior accidentyear reserves to the overall position reported in the interim results for theperiod to 30 June 2006. The information provided above on loss experience and Syndicate 2020's reservesdoes not necessarily mean that there will be an improvement in the WellingtonGroup's profitability either in the periods referred to or for the fullfinancial year. This is principally because losses in respect of the periodsreferred to which have not so far been reported or anticipated may arise. Catlin Catlin released its interim results for the six months to 30 June 2006 on 8September 2006. At that time Catlin reported record net income of $147.3 million(30 June 2005: $111.2 million). Gross premiums written increased by 15.5 percent. to $903.1 million (30 June 2005: $781.1 million). At that time, Catlinreported on the positive rating environment in catastrophe exposed classes ofbusiness following the 2005 US Hurricanes. Catlin also reported that weightedaverage premium rates for catastrophe exposed classes of business rose by 37 percent. during the first six months of 2006, while weighted average premium ratesfor other classes of business decreased by 2 per cent.. Weighted average premiumrates for all classes increased by 12 per cent.. The underlying trends that Catlin experienced in the period ended 30 June 2006remained largely unchanged during the period ended 30 September 2006, with bothpremium volume and loss activity remaining within management's expectations. Therating environment continued to be favourable. The 2006 Atlantic hurricane season has been benign to date, in sharp contrast tothe exceptional hurricane activity during 2005. Notwithstanding the fact thatthe Atlantic hurricane season has not yet concluded, management reaffirms theview expressed on 8 September 2006 that market conditions remain favourable andthat Catlin is looking ahead with optimism to the remainder of 2006 and into2007. 10. Cessation of Syndicate 2020 In conjunction with the Offer, Catlin has requested that Wellington, andWellington has agreed to, apply to Lloyd's for permission to cease Syndicate2020 with effect from the end of 2006, with the capital provided by WellingtonCorporate Members to that syndicate being made available to support underwritingon Syndicate 2003 for the 2007 year of account. For the 2006 year of account,Wellington's underwriting capacity on Syndicate 2020 is 67 per cent. of £800million. Following purchases in the 2006 capacity auctions, Wellington's plannedunderwriting capacity for the 2007 year of account on Syndicate 2020, was, priorto this Announcement, expected to be approximately 70 per cent. of £850 million. Catlin believes from experience, and Wellington concurs, that there aresignificant benefits to be derived from full ownership of syndicate capacityand, accordingly, underwriting capacity on Syndicate 2003 will not be madeavailable to unaligned members of Syndicate 2020. If the Cessation Applicationis approved, compensation will be paid to the unaligned members for thecessation of Syndicate 2020. The terms of the proposed compensation will allowthe unaligned members of Syndicate 2020 to choose between receiving either (i)50 pence in cash for each £1 of capacity on Syndicate 2020; or (ii) 40 pence incash for each £1 of capacity on Syndicate 2020 plus the option to maintain anequivalent amount of capacity on a new reinsurance syndicate that will write awhole account quota share reinsurance of Syndicate 2003 for at least the 2007and 2008 years of account. Should all unaligned members choose the all cashoption, compensation paid would total approximately £119 million. Members'agents representing unaligned members of Syndicate 2020 recommend that allunaligned members of Syndicate 2020 for whom they act vote in favour of andaccept the terms of the proposed compensation. Catlin and Wellington anticipatethat the Cessation Application will be determined by early December 2006. The Cessation Application and payment of compensation are conditional upon theOffer becoming or being declared unconditional in all respects but the Offer isnot conditional upon approval of the Cessation Application and will proceed,provided all of the conditions to the Offer are satisfied, regardless of whetheror not the Cessation Application is approved. In accordance with the requirements of Rule 16 of the Code, Lexicon Partners hasconfirmed that, having regard to the synergies and other benefits of the Offer,the payment of compensation pursuant to the Cessation Application to theunaligned members of Syndicate 2020 on the proposed terms is fair and reasonableso far as the independent Wellington Shareholders (being those WellingtonShareholders who are not unaligned members of Syndicate 2020) are concerned. 11. Management and Employees Following the Acquisition, Catlin's senior management will continue to lead theEnlarged Group in their current roles. However, the Board of Catlin recognisesthe importance of the skills and experience of the existing management andemployees of Wellington and believes that they will be an important factor forthe continuing success of the Catlin Group. The strength of the combination is founded on the quality of the people in bothCatlin and Wellington. The Enlarged Group will draw on the combined andcomplementary talent of both organisations in pursuing its growth plans. Catlinrecognises the importance of retaining and incentivising key Wellington peopleas the two businesses come together. Consistent with this, Catlin will put inplace appropriate retention arrangements to ensure a smooth transition andappropriate recognition. These arrangements will be applied consistently to keypeople across the Enlarged Group. Catlin has given assurances to the Wellington Board that, following the Offerbecoming or being declared unconditional in all respects, Catlin expects thatthe existing employment rights and terms and conditions of employment of theWellington Group's employees will be fully safeguarded. Wellington's pensionobligations will also be complied with. Catlin has stated that it has nointention to make detrimental changes to the benefits provided underWellington's pension schemes. Catlin's plans do not involve any changes to the conditions of employment of theWellington Group employees, nor are there any plans to change the principallocations of the Wellington Group's business. 12. Financing As part of the financing of the Acquisition, JPMorgan has provided Catlin withan underwritten bridge financing facility of $450 million and JPMorgan maysubsequently syndicate such facility to other financial institutions, inconsultation with Catlin. Catlin intends to refinance this facility with anissue of subordinated debt by the end of the first quarter of 2007, subject tomarket conditions. JPMorgan Cazenove, as financial adviser to Catlin, is satisfied that sufficientresources are available to Catlin to satisfy in full the cash considerationpayable to Wellington Shareholders under the terms of the Offer. 13. Inducement Fee Catlin and Wellington have agreed that each party shall pay to the other aninducement fee (inclusive of value added tax) of an amount equal to 1 per cent.of the total consideration payable under the Offer, in respect of the issuedshare capital of Wellington as at the date of this Announcement, in thefollowing circumstances: • Wellington will pay an inducement fee if following the making of the Offer, it lapses or is withdrawn as a result of a failure to meet the acceptance condition and: (a) an Independent Competing Offer becomes effective or is declared unconditional in all respects; or (b) before the Offer lapses or is withdrawn, Wellington's directors have: (i) withdrawn or, in a manner adverse to Catlin, modified their approval or unanimous recommendation of the Offer; or (ii) publicly approved or recommended an Independent Competing Offer; • Catlin will pay an inducement fee if: (a) following the making of the Offer, it lapses or is withdrawn and, before it lapses or is withdrawn, Catlin's directors have withdrawn or, in a manner adverse to Wellington, modified their approval or unanimous recommendation to Catlin Shareholders to vote in favour of all resolutions to be proposed at the Special General Meeting (or at any adjournment thereof); or (b) Catlin Shareholders do not pass all resolutions as may be necessary to approve, implement and effect the Offer at the Special General Meeting (or at any adjournment thereof) by not later than 31 December 2006. 14. Wellington Share Schemes The Offer will extend to any Wellington Shares which are issued orunconditionally allotted and fully paid (or credited as fully paid) while theOffer remains open for acceptances (or, subject to the City Code, by suchearlier date as Catlin may decide), including Wellington Shares issued pursuantto the exercise of options or awards granted under the Wellington Share Schemesor otherwise. Participants in the Wellington Share Schemes will be written to separately andappropriate proposals will be made to such participants in due course. 15. Offer Document The Offer will be subject to the applicable requirements of the City Code. TheOffer Document, setting out the details of the Offer and enclosing the Form ofAcceptance and Election, will be despatched to Wellington Shareholders shortlyand in any event within twenty-eight days of the date of this Announcement,unless otherwise agreed with the Panel. 16. New Catlin Shares, Listing, Dealings, De-listing and Compulsory Acquisition The New Catlin Shares will be common shares of $0.01 each in the capital ofCatlin. The New Catlin Shares will be issued credited as fully paid and willrank pari passu in all respects with the existing Catlin Shares except that theywill not be entitled to Catlin's interim dividend of 6.0 pence (11.3 cents) pershare for the six months ended 30 June 2006. The New Catlin Shares will beissued in registered form and will be represented by depositary interests whichwill be capable of being held in both certificated and uncertificated form,further details of which will be set out in the Offer Document. Applications will be made to the UK Listing Authority for the New Catlin Sharesto be admitted to the Official List and to trading on the London StockExchange's market for listed securities. It is expected that Admission willbecome effective and that dealings for normal settlement in the New CatlinShares will commence as soon as practicable after the Offer becomes whollyunconditional. The Prospectus will be despatched to Wellington Shareholders indue course, and it is Catlin's current intention for this to occur no later thanthe date on which the circular to Catlin Shareholders is despatched. As soon as it is appropriate to do so, and subject to the Offer becoming orbeing declared unconditional in all respects, Catlin intends to procure thatWellington applies for the cancellation of the listing of the Wellington Shareson the Official List and for the cancellation of trading for the WellingtonShares on the London Stock Exchange's market for listed securities. It isanticipated that such cancellations will take effect no earlier than twentyBusiness Days after Catlin has, by virtue of its shareholding and acceptances ofthe Offer, acquired or contracted to acquire 75 per cent. of the voting rightsattaching to the Wellington Shares. The cancellation of the listing wouldsignificantly reduce the liquidity and marketability of any Wellington Sharesnot assented to the Offer at that time. If Catlin receives acceptances under the Offer in respect of 90 per cent. ormore of the Wellington Shares to which the Offer relates, Catlin will exerciseits right pursuant to the provisions of Schedule 2 to the Interim ImplementationRegulations to acquire compulsorily the remaining Wellington Shares in respectof which the Offer has not been accepted. It is proposed that following theOffer becoming or being declared unconditional as to acceptances Wellington willbe re-registered as a private company under the relevant provisions of theCompanies Act. 17. Special General Meeting of Catlin The Offer is conditional upon, inter alia, Catlin Shareholders approving theAcquisition and the issue of the New Catlin Shares pursuant to the Offer. Ashareholder circular, including a notice convening the Special General Meeting,will be sent to Catlin Shareholders for this purpose in due course. The Board of Catlin intends unanimously to recommend that Catlin Shareholdersvote in favour of the resolutions to be proposed at the Special General Meetingas Catlin's Directors intend to do in respect of their own beneficial holdingsof Catlin Shares which represent 1.78 per cent. of Catlin's existing issuedshare capital. 18. Overseas Shareholders The availability of the Offer to persons not resident in the United Kingdom maybe affected by the laws of the relevant jurisdiction where they are resident.Wellington Shareholders who are not resident in the United Kingdom should informthemselves about, and observe, any applicable requirements. 19. Disclosure of Interests in Wellington and Irrevocable Undertakings The Wellington Directors who hold Wellington Shares have given Catlinirrevocable undertakings to accept the Offer in respect of their own beneficialholdings of Wellington Shares, amounting in aggregate to 764,244 WellingtonShares, representing approximately 0.16 per cent. of Wellington's existingissued share capital. The irrevocable undertakings will cease to be binding onlyif the Offer, having been made, lapses or is withdrawn. Except for the irrevocable undertakings summarised above, neither Catlin nor, sofar as the Catlin Directors are aware, any person acting in concert with it ownsor controls or has borrowed or lent (save for any borrowed shares which havebeen either on-lent or sold) any Wellington Shares or any securities convertibleor exchangeable into Wellington Shares or any rights to subscribe for orpurchase the same, or holds any options (including traded options) in respectof, or has any option to acquire, any Wellington Shares or has entered into anyderivatives referenced to Wellington Shares which remain outstanding, nor doesany such person hold any long exposure or short positions in relation toWellington Shares (whether conditional or absolute and whether in the money orotherwise) including any short position under a derivative, any agreement tosell or any delivery obligation or right to require another person to purchaseor take delivery, nor does any such person have any arrangement in relation toWellington Shares. For these purposes, "arrangement" includes any indemnity or option arrangement,any agreement or understanding, formal or informal, of whatever nature, relatingto Wellington Shares which may be an inducement to deal or refrain from dealingin such shares. 20. Recommendation The Board of Wellington, which has been so advised by Lexicon Partners,considers the terms of the Offer to be fair and reasonable. In providing adviceto the Wellington Board, Lexicon Partners has taken into account the commercialassessments of the Wellington Board. Accordingly, the Board of Wellingtonintends unanimously to recommend that Wellington Shareholders accept the Offer.The members of the Board of Wellington who hold Wellington Shares have givenCatlin irrevocable undertakings to accept the Offer in respect of their ownbeneficial holdings of Wellington Shares, which represent approximately 0.16 percent. of Wellington's existing issued share capital. ENQUIRIES For further information, contact: CatlinJames Burcke (Head of Communications, London)Tel: +44 (0)20 7458 5710Mobile: +44 (0)7958 767738Email: james.burcke@catlin.com William Spurgin (Head of Investor Relations, London)Tel: +44 (0)20 7458 5726Mobile: +44 (0)7710 314365Email: william.spurgin@catlin.com JPMorgan CazenoveSole financial adviser and joint corporate broker to CatlinTel: +44 (0)20 7588 2828Tim WiseRobert ThomsonConor Hillery UBS Investment BankJoint corporate broker to CatlinTel: +44 (0)20 7567 8000Phil Shelley MaitlandPublic relations adviser to CatlinLiz MorleyNeil BennettTel: +44 (0)20 7379 5151Email: emorley@maitland.co.uk WellingtonTel: +44 (0)20 7337 2000Preben Prebensen (Chief Executive) Lexicon PartnersSole financial adviser to WellingtonTel: +44 (0)20 7653 6000Angus WintherJames Viggers Citigroup Global MarketsSole corporate broker to WellingtonTel: +44 (0)20 7986 4000Andrew Thompson Financial DynamicsPublic relations adviser to WellingtonTel: +44 (0)20 7269 7200Rob BailhacheGeoffrey Pelham-Lane Note:1. The statements that the Acquisition will be earnings enhancing do notconstitute a profit forecast and should not be interpreted to mean that theearnings per share in the first full financial year following the Acquisition,or in any subsequent period, would necessarily match or be greater than thosefor the relevant preceding financial year. The Offer will be on the terms and conditions set out herein and in Appendix Iand to be set out in the Offer Document and Form of Acceptance and Election. Itis intended that the Offer Document (including a letter of recommendation fromthe Chairman of Wellington) and Forms of Acceptance and Election will bedespatched shortly to Wellington Shareholders. Appendix II contains the sources and bases of certain information set out inthis Announcement. JPMorgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Catlin and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Catlin for providing the protections afforded to clients of JPMorganCazenove or for providing advice in relation to the Offer, the contents of thisAnnouncement, or any matter referred to herein. UBS Limited, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Catlin and no one elsein connection with the Offer and will not be responsible to anyone other thanCatlin for providing the protections afforded to clients of UBS Limited or forproviding advice in relation to the Offer, the contents of this Announcement, orany matter referred to herein. Lexicon Partners, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Wellington and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Wellington for providing the protections afforded to clients of LexiconPartners or for providing advice in relation to the Offer, the contents of thisAnnouncement, or any matter referred to herein. Citigroup Global Markets, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively forWellington and no one else in connection with the Offer and will not beresponsible to anyone other than Wellington for providing the protectionsafforded to clients of Citigroup Global Markets or for providing advice inrelation to the Offer, the contents of this Announcement, or any matter referredto herein. This Announcement does not constitute, or form part of, any offer or invitationto sell or purchase any securities, or any solicitation of any offer for,securities in any jurisdiction. Any acceptance or other response to the Offershould be made only on the basis of information contained in or referred to inthe Offer Document and the Prospectus which Catlin intends to despatch shortlyto Wellington Shareholders. Such documents will contain important informationwhich Wellington Shareholders are urged to read carefully. The release, publication or distribution of this Announcement in certainjurisdictions may be restricted by law and therefore persons in suchjurisdictions into which this Announcement is released, published or distributedshould inform themselves about and observe such restrictions. Further, the lawsof the relevant jurisdiction may affect the availability of the Offer (includingthe Mix and Match Facility) to persons not resident in the United Kingdom.Persons who are not resident in the United Kingdom, or who are subject to thelaws of any jurisdiction other than the United Kingdom should inform themselvesabout, and observe, any applicable requirements. Further details in relation tooverseas shareholders will be contained in the Offer Document and theProspectus. The information contained herein is not for publication or distribution into theUnited States. The material set forth herein is for information purposes onlyand should not be construed as an offer for securities for sale in or into theUnited States. The New Catlin Shares to be issued in connection with the Offerhave not been, nor will they be, registered under the US Securities Act of 1933,as amended, or under the securities laws of any state of the United States ofAmerica and may not be offered or sold in the United States of America, absentregistration or an applicable exemption from registration. No public offering ofthe securities will be made in the United States of America. The relevantclearances have not been, and will not be, obtained from the securitiescommission of any province or territory of Canada; no Prospectus or a Prospectusequivalent has been, or will be, lodged with, or registered by, the AustralianSecurities and Investments Commission and the New Catlin Shares have not been,nor will they be, registered under or offered in compliance with applicablesecurities laws of any state, province, territory or jurisdiction of Canada orAustralia. Accordingly, Catlin Shares may not (unless an exemption underrelevant securities laws is applicable) be offered, sold, resold or delivered,directly or indirectly, in or into Canada or Australia or any other jurisdictionoutside the United Kingdom if to do so would constitute a violation of therelevant laws of, or require registration thereof in, such jurisdiction or to,or for the account or benefit of, a person located in Canada or Australia orsuch other jurisdiction. This Announcement, including information included or incorporated by reference,may contain a number of forward-looking statements relating to Catlin andWellington with respect to, among others, the following: financial condition;results of operation; the businesses of Catlin and Wellington; future benefitsof the transaction; and management plans and objectives. Catlin and Wellingtonconsider any statements that are not historical facts as "forward-lookingstatements". They involve a number of risks and uncertainties that could causeactual results to differ materially from those suggested by the forward-lookingstatements. Important factors that could cause actual results to differmaterially from estimates or forecasts contained in the forward-lookingstatements include, among others, the following possibilities: future revenuesare lower than expected; costs or difficulties relating to the combination ofthe businesses of Catlin and Wellington, or of other future acquisitions, aregreater than expected; expected cost savings from the transaction or from otherfuture acquisitions are not fully realised or not realised within the expectedtime frame; competitive pressures in the industry increase; general economicconditions or conditions affecting the relevant industries, whetherinternationally or in the places Catlin and Wellington do business are lessfavourable than expected, and/or conditions in the securities market are lessfavourable than expected. The estimated operational cost savings and financial synergies have beencalculated on the basis of the existing cost and operating structures of thecompanies and by reference to current prices and the current regulatoryenvironment. These statements of estimated cost savings relate to future actionsand circumstances which, by their nature, involve risk, uncertainties and otherfactors. Because of this, the cost savings and financial synergies referred tomay not be achieved, or those achieved could be materially different from thoseestimated. These statements should not be interpreted to mean that the earningsper share in the first full financial year following the Acquisition, or in anysubsequent period, would necessarily match or be greater than those for therelevant preceding financial period. Catlin Shareholders and Wellington Shareholders should note that the priorconsent of the Financial Services Authority and Lloyd's (and potentially otherregulatory authorities in jurisdictions in which the Catlin Group and/or theWellington Group conduct their business) will be required for any person eitheralone or with their associates to hold or control, directly or indirectly, 10per cent. or more of Catlin's common issued share capital following theAcquisition, as that person will be regarded as a "controller" of the regulatedinsurance entities in the Enlarged Group. In order to obtain such consents, therelevant person will be required to provide certain information to the FinancialServices Authority, Lloyd's or other regulatory bodies (as applicable) and maybe required to give certain undertakings in respect of its interest. If therelevant person fails to obtain such consent, the Catlin Board may invokeprovisions contained in Catlin's byelaws which may result in some or all of theshares in Catlin (including the New Catlin Shares) held by such person ceasingto carry the right to vote or in the person being required to sell some or allof its shares in Catlin. Shareholders should also be aware that the FinancialServices Authority may exercise the powers conferred on it by section 189 of theFSMA and may impose criminal sanctions under section 191 of the FSMA. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers, ifany person is, or becomes, "interested" (directly or indirectly) in 1 per cent.or more of any class of "relevant securities" of Catlin or of Wellington, all"dealings" in any "relevant securities" of that company (including by means ofan option in respect of, or a derivative referenced to, any such "relevantsecurities") must be publicly disclosed by no later than 3.30 pm (London time)on the business day following the date of the relevant transaction. Thisrequirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is withdrawn or until the"offer period" otherwise ends. If two or more persons act together pursuant toan agreement or understanding, whether formal or informal, to acquire an"interest" in "relevant securities" of Catlin or Wellington, they will be deemedto be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Catlin or of Wellington by Catlin or Wellington, or by any oftheir respective "associates", must be disclosed by no later than 12.00 noon(London time) on the business day following the date of the relevanttransaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. Appendix I Conditions to and further terms of the Offer Part A - Conditions of the Offer The Offer will be subject to the following conditions: (a) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00pm (London time) on the First Closing Date (or such later time(s) and/or date(s) as Catlin may, subject to the City Code, decide) in respect of not less than 90 per cent. (or such lesser percentage as Catlin may decide) in nominal value of the Wellington Shares to which the Offer relates and that represent not less than 90 per cent. (or such lesser percentage as Catlin may decide) of the voting rights carried by the Wellington Shares to which the Offer relates, provided that this condition shall not be satisfied unless Catlin and/or any of its wholly-owned subsidiaries shall have acquired or agreed to acquire whether (pursuant to the Offer or otherwise) directly or indirectly, Wellington Shares carrying, in aggregate, more than 50 per cent. of the voting rights then normally exercisable at general meetings of Wellington including, for this purpose (to the extent, if any, required by the Panel), any such voting rights attaching to any Wellington Shares that are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription conversion or exchange rights or otherwise; and, for the purpose of this condition: (i) the expression "Wellington Shares to which the Offer relates" means (i) the existing unconditionally allotted or issued and fully paid ordinary shares of 10 pence each in the capital of Wellington on the date that the Offer is made and (ii) any further ordinary shares of 10 pence each in the capital of Wellington which are unconditionally allotted or issued and fully paid after that date but before the date on which the Offer ceases to be open for acceptance or such earlier date as Catlin (subject to the City Code) may determine (not being earlier than the date on which the Offer becomes or is declared unconditional as to acceptances), but (iii) excludes any issued Wellington Shares held as treasury shares except to the extent that they are transferred out of treasury whilst the Offer remains open for acceptance and (iv) excludes any Wellington Shares which are treated at the date of the Offer as already held by Catlin for the purposes of paragraph 1(1) of Schedule 2 to the Interim Implementation Regulations; (ii) Wellington Shares which have been unconditionally allotted but not issued shall be deemed to carry the voting rights which they will carry upon issue; and (iii) valid acceptances shall be deemed to have been received in respect of Wellington Shares which are treated for the purposes of paragraph 2 (15) of Schedule 2 of the Interim Implementation Regulations as having been acquired or contracted to be acquired by Catlin by virtue of acceptances of the Offer; (b) the passing at the Special General Meeting (or at any adjournment thereof) of such resolutions as may be necessary to approve, implement and effect the Offer and the Acquisition (including, without limitation, resolutions to increase Catlin's authorised share capital and to authorise the directors of Catlin to allot shares pursuant to or in connection with the Offer); (c) the admission of the New Catlin Shares to the Official List becoming effective in accordance with the Listing Rules and the admission to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission and Disclosure Standards, or (if Catlin so determines and subject to the consent of the Panel) the UK Listing Authority and the London Stock Exchange agreeing to admit such shares to listing and trading respectively subject only to allotment of such shares; (d) the Financial Services Authority having notified Catlin in writing in terms satisfactory to Catlin and Wellington (Catlin and Wellington acting reasonably in assessing whether such terms are satisfactory) that it does not object to any person pursuant to the Offer becoming a controller of any member of the wider Wellington Group or any member of the wider Catlin Group for the purposes of the FSMA and Lloyd's having notified Catlin in writing in terms satisfactory to Catlin and Wellington (Catlin and Wellington acting reasonably in assessing whether such terms are satisfactory) that it consents to Catlin and any other person becoming a controller of WUAL and the Wellington Corporate Members for the purposes of the Lloyd's Definitions Bye-Law; (e) the Office of Fair Trading indicating in terms satisfactory to Catlin that it does not intend to refer the Acquisition or any matters arising therefrom to the Competition Commission; (f) all filings having been made and all or any applicable waiting and other time periods (including extensions thereto) under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended) and the regulations thereunder having expired, lapsed or been terminated as appropriate in respect of the Offer and the acquisition of any shares in, or control of, Wellington or any other member of the Wellington Group by Catlin or any member of the wider Catlin Group or any matters arising therefrom; (g) all necessary filings having been made, all appropriate waiting periods under any applicable legislation or regulations of any jurisdiction having expired, lapsed or terminated in each case in respect of the Offer and the proposed acquisition of any shares in, or control of, Wellington or any other member of the wider Wellington Group by Catlin or any other member of the wider Catlin Group, and all authorisations, orders, recognitions, grants, determinations, consents, licences, confirmations, valuations, reports, clearances, certificates, permissions, exemptions and approvals (each an "Authorisation") necessary or considered appropriate by Catlin and Wellington (Catlin and Wellington acting reasonably in considering whether any such Authorisation is appropriate) for or in respect of the Offer or the proposed acquisition of any shares in, or control of, Wellington or any other member of the wider Wellington Group by Catlin or any other member of the wider Catlin Group or the carrying on by any member of the wider Wellington Group of its business having been obtained, in terms and in a form reasonably satisfactory to Catlin and Wellington from all appropriate Third Parties or from any persons or bodies with whom any member of the wider Wellington Group has entered into contractual arrangements, in each case where the absence of such Authorisation from such a person is reasonably likely to have a material adverse effect on the wider Wellington Group taken as a whole and all such Authorisations remaining in full force and effect and there being no notice or intimation of any intention to revoke, withdraw, withhold, suspend, restrict, modify, amend or not to grant or renew the same, which in any such case is reasonably likely to have a material adverse effect on the wider Wellington Group taken as a whole; (h) except as Disclosed by Wellington, there being no provision of any agreement, authorisation, arrangement, franchise, licence, permit or other instrument to which any member of the wider Wellington Group is a party or by or to which any member of the wider Wellington Group or any of its assets may be bound, entitled or subject, which in consequence of the Offer or the proposed acquisition of any shares in, or control of Wellington or any other member of the wider Wellington Group by Catlin or any member of the wider Catlin Group or because of a change of control or management of any member of the wider Wellington Group or otherwise, would or is reasonably likely to result to an extent which would or is reasonably likely to be material in the context of the wider Wellington Group taken as a whole, in: (i) any monies borrowed by or any other indebtedness, actual or contingent, of any such member being or becoming repayable or capable of being declared repayable immediately or earlier than its stated maturity, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of being withdrawn or materially inhibited; (ii) any such agreement, authorisation, arrangement, franchise, licence, permit or other instrument being terminated or adversely modified or any obligation arising or any adverse action being taken or arising thereunder; (iii) the interests or business of any such member of the wider Wellington Group in or with any other person, firm, company or body (or any arrangements relating to such interests or business) being terminated, modified or adversely affected; (iv) any assets of any such member of the wider Wellington Group being or falling to be disposed of or charged otherwise than in the ordinary course of business; (v) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any such member of the wider Wellington Group or any such security (whenever arising or having arisen) becoming enforceable; (vi) the creation of any liabilities (actual or contingent) by any member of the wider Wellington Group; or (vii) the financial or trading position or prospects of the wider Wellington Group being materially adversely affected, and no event having occurred which, under any provision of any such agreement, authorisation, arrangement, franchise, licence, permit or other instrument, would or is reasonably likely to result in any of the events or circumstances which are referred to in paragraphs (i) to (vii) of this condition (h) where such result would or is reasonably likely to be material in the context of the wider Wellington Group taken as a whole; (i) no Third Party having decided to take, instituted, implemented or threatened any action, proceeding, suit, investigation or enquiry, or enacted or made any statute, regulation or order or taken any other step which would or is reasonably likely to: (i) require or prevent a material divestiture by any member of the wider Catlin Group or any member of the wider Wellington Group of all or any portion of their respective businesses, assets or properties or impose any material limitation on the ability of any of them to conduct their respective businesses and to own any of their respective assets or property; (ii) impose any material limitation on the ability of any member of the wider Catlin Group or of the wider Wellington Group to acquire or hold or to exercise effectively, directly or indirectly, any rights of ownership in respect of shares or the equivalent in any member of the wider Wellington Group or to exercise management control over any such member; (iii) otherwise materially and adversely affect any or all of the businesses, assets, profits or prospects of any member of the wider Catlin Group or any member of the wider Wellington Group; (iv) make the Offer or the proposed acquisition of any shares in Wellington or any other member of the wider Wellington Group or control of Wellington by Catlin or any member of the wider Catlin Group void, illegal and/or unenforceable under the laws of any jurisdiction, or otherwise, directly or indirectly, materially restrain, restrict, prohibit or delay or otherwise materially impede or challenge the implementation thereof, or impose material additional conditions or obligations with respect thereto; (v) result in a material delay in the proposed acquisition of any shares in or control, of Wellington or any other member of the wider Wellington Group by any member of the wider Catlin Group, or render any member of the wider Catlin Group unable to acquire some or all of the shares in, or control of, Wellington or any other member of the wider Wellington Group; (vi) result in any member of the wider Wellington Group ceasing to be able to carry on any business which is material in the context of the wider Wellington Group; or (vii) save pursuant to the Offer or pursuant to Schedule 2 of the Interim Implementation Regulations, require any member of the wider Catlin Group or of the wider Wellington Group to offer to acquire any Wellington Shares or shares in any member of the wider Wellington Group owned by any third party, and all applicable waiting and other time periods during which any such Third Party could take, institute, implement or decide to take or threaten any such action, proceeding, suit, investigation or enquiry having expired, lapsed or been terminated; (j) except as Disclosed by Wellington, no member of the wider Wellington Group having since 31 December 2005: (i) (save as between Wellington and wholly-owned subsidiaries of Wellington or between such wholly-owned subsidiaries or on the exercise of rights to subscribe for Wellington Shares or pursuant to the exercise of options granted under the Wellington Share Schemes on or prior to the date of this Announcement), issued or authorised the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for, or acquire, any such shares or convertible securities or redeemed, purchased or reduced or made any other change to any part of its share capital; (ii) save for the interim dividend of 1.6 pence per Wellington Share payable in respect of the six months ended 30 June 2006 to Wellington Shareholders on the register as at 15 September 2006, declared, paid or made any bonus, dividend or other distribution (other than as between Wellington and its wholly-owned subsidiaries or between such wholly-owned subsidiaries); (iii) merged with any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any material assets or any material rights, title or interest in any asset (including shares and trade investments (other than in the ordinary course of business or a transaction between Wellington and its wholly-owned subsidiaries or between such wholly-owned subsidiaries); (iv) save as between Wellington and its wholly-owned subsidiaries or between such wholly-owned subsidiaries, issued or authorised the issue of any debentures or incurred or increased any indebtedness or contingent liability which in any such case is material; (v) save as between Wellington and its wholly-owned subsidiaries or between such wholly-owned subsidiaries, entered into any material contract, reconstruction, amalgamation, commitment or other transaction or arrangement otherwise than in the ordinary course of business or waived or compromised any material claim or entered into or materially changed the terms of any contract with any director; (vi) save as between Wellington and its wholly-owned subsidiaries or between such wholly-owned subsidiaries, entered into, implemented, effected or varied, any material contract or commitment (whether in respect of capital expenditure or otherwise) which is of a long term or unusual nature or which involves or is reasonably likely to involve an obligation of such magnitude or nature or which is reasonably likely to materially restrict the business of any member of the wider Wellington Group; (vii) terminated or varied the terms of any material agreement or arrangement between any member of the wider Wellington Group and any other person in a manner which is reasonably likely to have a material adverse effect on the position or prospects of the wider Wellington Group taken as a whole; (viii) modified the terms of any share option scheme, incentive scheme or other benefit relating to the employment or termination of employment of any person employed by the wider Wellington Group which is material in the context of the wider Wellington Group taken as a whole; (ix) taken any corporate action or had any legal proceedings instituted or threatened against it or petition presented or order made for its winding-up (voluntarily or otherwise), dissolution or reorganisation or for the appointment of a receiver, trustee, administrator, administrative receiver or similar officer of all or any part of its assets and revenues or any analogous or equivalent steps or proceedings in or under the laws of any jurisdiction which in any case is material; (x) made any material alteration to its memorandum or articles of association; or (xi) entered into any agreement, commitment or arrangement or passed any resolution or made any offer (which remains open for acceptance) or proposed or announced any intention with respect to any of the transactions, matters or events referred to in this condition (j); (k) since 31 December 2005, and save as Disclosed by Wellington: (i) no change or deterioration having occurred in the business, assets, financial or trading position or profits of any member of the wider Wellington Group; (ii) no litigation, arbitration proceedings, prosecution or other legal proceedings or investigation having been instituted or threatened by or against or remaining outstanding against any member of the wider Wellington Group or to which any member of the wider Wellington Group is a party (whether as plaintiff, defendant or otherwise); (iii) no contingent liability having arisen or become apparent or increased; and (iv) (other than as a result of the Offer) no enquiry or investigation by, or complaint or reference to, any Third Party having been threatened, announced, implemented, instituted by or against or remaining outstanding against or in respect of any member of the wider Wellington Group, and which in any such case is material and adverse in the context of the wider Wellington Group taken as a whole; (l) except as Disclosed by Wellington, Catlin not having discovered that: (i) any financial or business or other information concerning any member of the Wellington Group which has been publicly announced at any time by any member of the Wellington Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and which was not subsequently corrected before the day immediately preceding the date of the Announcement by being publicly announced and which information is material in the context of the Wellington Group taken as a whole; or (ii) any member of the wider Wellington Group is subject to any liability (contingent or otherwise) which has not been Disclosed and which is material in the context of the Wellington Group taken as a whole; (m) since 31 December 2005, and save as Disclosed by Catlin: (i) no change or deterioration having occurred in the business, assets, financial or trading position or profits of any member of the wider Catlin Group; (ii) no litigation, arbitration proceedings, prosecution or other legal proceedings or investigation having been instituted or threatened by or against or remaining outstanding against any member of the wider Catlin Group or to which any member of the wider Catlin Group is a party (whether as plaintiff, defendant or otherwise); (iii) no contingent liability having arisen or become apparent or increased; and (iv) (other than as a result of the Offer) no enquiry or investigation by, or complaint or reference to, any Third Party having been threatened, announced, implemented, instituted by or against or remaining outstanding against or in respect of any member of the wider Catlin Group, and which in any such case is material and adverse in the context of the wider Catlin Group taken as a whole; and (n) except as Disclosed by Catlin, Wellington not having discovered that: (i) any financial or business or other information concerning any member of the Catlin Group which has been publicly announced at any time by any member of the Catlin Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading and was not subsequently corrected before the day immediately preceding the date of the Announcement by being publicly announced and which information is material in the context of the Catlin Group taken as a whole; or (ii) any member of the wider Catlin Group is subject to any liability (contingent or otherwise) which has not been Disclosed and which is material in the context of the Catlin Group taken as a whole. For the purposes of these conditions: • the "wider Wellington Group" means Wellington and its subsidiary undertakings, associated undertakings and any other undertaking in which Wellington and such undertakings (aggregating their interests) have a significant interest and the "wider Catlin Group" means Catlin and its subsidiary undertakings, associated undertakings and any other undertaking in which Catlin and such undertakings (aggregating their interests) have a significant interest and, for these purposes, "subsidiary undertaking", "associated undertaking" and "undertaking" have the meanings given by the Companies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the Companies Act) and "significant interest" means an interest in twenty per cent. or more of the equity capital of an undertaking; • the term "material" or "materially" means material or materially in the context of the wider Wellington Group (or, as the case may be, the wider Catlin Group) taken as a whole; • any event or matter concerning the "wider Wellington Group" or "the wider Catlin Group" shall be deemed to be waived by Catlin (or Wellington as the case may be) unless such event or matter was of sufficient significance to have a material adverse effect on the wider Wellington Group (or, as the case may be, the wider Catlin Group) taken as a whole; • "Disclosed by Catlin" means fairly disclosed in writing by or on behalf of Catlin to Wellington prior to the date of this Announcement, disclosed in Catlin's annual report and accounts for the year ended 31 December 2005 or in Catlin's unaudited interim results for the half year ended 30 June 2006 or as publicly announced by Catlin prior to the date of this Announcement; • "Disclosed by Wellington" means fairly disclosed in writing by or on behalf of Wellington to Catlin prior to the date of this Announcement, disclosed in Wellington's annual report and accounts for the year ended 31 December 2005 or in Wellington's unaudited interim results for the half year ended 30 June 2006 or as publicly announced by Wellington prior to the date of this Announcement; • "Third Party" means any government or governmental, quasi-governmental, supranational, statutory or regulatory body, or any court, trade agency, association, institution or professional or environmental body or any other body or person in any jurisdiction; and • "publicly announced" means an announcement notified to a Regulatory Information Service being any service authorised from time to time by the UK Listing Authority for the purposes of the dissemination of regulatory announcements required by the Listing Rules. Catlin reserves the right to waive, in whole or in part, all or any of the aboveconditions except conditions (b) to (g) (inclusive), (m) and (n). Conditions (d)to (g) inclusive may be waived by agreement in writing by Catlin and Wellington. Wellington reserves the right to waive either of conditions (m) or (n) in wholeor in part. In the event that Catlin intends to declare the Offer unconditional in allrespects (save for satisfaction of condition (c)) it shall be entitled to givewritten notice ("the Catlin Notice") to Wellington requiring Wellington tonotify Catlin in writing as soon as practicable and in any event within oneBusiness Day whether or not conditions (d) to (g) inclusive, (m) and (n) havebeen fulfilled and, if they have not, whether Wellington wishes to waive them.The Catlin Notice shall contain a confirmation that, so far as Catlin is aware(but without making enquiry) there is no event, circumstance or matter which hasoccurred which would mean that any of the conditions referred to in paragraphs(d) to (g) inclusive, (m) or (n) have not been fulfilled. Unless Wellingtonadvises Catlin within such period that any of conditions (d) to (g) inclusive,(m) or (n) have not been fulfilled nor have been waived, such conditions shallbe deemed to have been fulfilled or waived provided that Catlin declares theOffer unconditional in all respects (save for satisfaction of condition (c))within one Business Day after the expiry of such period. Subject to the immediately preceding paragraph, Wellington shall not be underany obligation to waive or treat as satisfied either of the conditions referredto in paragraphs (m) and (n) above by a date earlier than the date specifiedbelow for the satisfaction thereof notwithstanding that the other conditions ofthe Offer may at such earlier date have been waived or fulfilled and that thereare at such earlier date no circumstances indicating that any of such conditionsmay not be capable of fulfilment. If Catlin is required by the Panel to make an offer for Wellington Shares underthe provisions of Rule 9 of the City Code, Catlin may make such alterations tothe above conditions, including condition (a), as are necessary to comply withthe provisions of that Rule. FURTHER PROVISIONS RELATING TO THE OFFER The Offer is final and will not be increased, except that Catlin reserves theright to increase the Offer if any third party announces a firm intention tomake an offer for Wellington. The Offer will lapse unless all the conditions relating to the Offer have beenfulfilled or satisfied or (if capable of waiver) waived, at midnight on thetwenty first day after the later of the First Closing Date and the date on whichthe Offer becomes or is declared unconditional as to acceptances, or in eachcase such later date as Catlin may, with the consent of the Panel or inaccordance with the Code, decide. Catlin shall be under no obligation to waiveor treat as satisfied any of conditions (b) to (g) (inclusive) by a date earlierthan the latest date specified above for the satisfaction thereofnotwithstanding that the other conditions of the Offer may at such earlier datehave been waived or fulfilled and that there are at such earlier date nocircumstances indicating that any such conditions may not be capable offulfilment. Wellington shall be under no obligations to waive or treat assatisfied any of conditions (d) to (g) inclusive, (m) or (n) by a date earlierthan the latest date specified above for the satisfaction thereofnotwithstanding that the other conditions of the Offer may at such earlier datehave been waived or fulfilled and that there are at such earlier date nocircumstances indicating that any such conditions may not be capable offulfilment. The Offer will lapse (unless the Panel otherwise consents) if, before the FirstClosing Date or the time and date when the Offer becomes or is declaredunconditional as to acceptances (whichever is the later), the Offer, or anyaspect of it, is referred to the Competition Commission or the EuropeanCommission either initiates proceedings under Article 6(1)(c) of CouncilRegulation (EC) No 139/2004 or, following a referral by the European Commissionto a competent authority in the United Kingdom under Article 9(1) of thatRegulation, there is a subsequent reference to the Competition Commission. If the Offer lapses, the Offer will cease to be capable of further acceptanceand Catlin, JPMorgan Cazenove and accepting Wellington Shareholders shall thencease to be bound by Forms of Acceptance and Election delivered at or before thetime when the Offer lapses. The Offer will be governed by English law and be subject to the jurisdiction ofthe English courts. The Offer will comply with the rules and regulations of the Financial ServicesAuthority, the London Stock Exchange and with the Code. The Wellington Shares are to be acquired by Catlin pursuant to the Offer fullypaid and free from all liens, charges, equitable interests, encumbrances,pre-emptive rights and other third party rights and interests of any naturewhatsoever and together with all rights now and hereafter attaching thereto,including the right to receive and retain all dividends and other distributions(if any) declared, made or paid, after the date of this Announcement save forthe interim dividend of 1.6 pence per Wellington Share payable in respect of thesix months ended 30 June 2006 to be paid on 24 November 2006 to WellingtonShareholders on the register as at 15 September 2006. The Offer is not being made, directly or indirectly, in or into, Australia,Canada or any other jurisdiction where to do so would constitute a violation ofthe relevant laws of such jurisdiction. Each of conditions (a) to (n) shall be regarded as a separate condition andshall not be limited by reference to any other condition. Appendix II Sources and Bases of Information In this Announcement: 1. Unless otherwise stated: (i) information relating to Wellington has been extracted without materialadjustment from the audited financial statements of Wellington for the relevantfinancial year or from Wellington's unaudited interim results and tradingstatements; and (ii) information relating to Catlin has been extracted without materialadjustment from the audited financial statements of Catlin for the relevantfinancial year or from Catlin's unaudited interim results and tradingstatements. 2. Unless otherwise stated, all prices quoted for shares are closing middlemarket prices and are derived from the Daily Official List of the London StockExchange. 3. The value of the whole of the issued share capital of Wellington ofapproximately £591 million is based upon 486,807,484 shares being the number ofexisting issued shares of Wellington as at the close of business on the lastBusiness Day preceding the date of this Announcement and an offer value ofapproximately 121 pence per Wellington Share. 4. The number of New Catlin Shares to be issued pursuant to the Offer, being82,757,272 (assuming full acceptance of the Offer and no options existing underthe Wellington Share Schemes are exercised) is based on 486,807,484 WellingtonShares in issue on 27 October 2006. 5. All share prices expressed in pence have been rounded to one decimal placeand all percentages have been rounded to zero, one or two decimal places. 6. As at 27 October 2006 (being the last Business Day before this Announcement),486,807,484 Wellington Shares were in issue. The International SecuritiesIdentification Number for Wellington Shares is GB0009474080. In addition, as at27 October 2006 (being the last Business Day before this Announcement)163,744,088 Catlin Shares were in issue. The International SecuritiesIdentification Number for Catlin Shares is BMG196F11004. Appendix III Definitions The following definitions apply throughout this Announcement unless the contextotherwise requires: "2005 US Hurricanes" means hurricanes Katrina, Rita and Wilma which affected the US during the course of 2005; "Acquisition" means the proposed acquisition by Catlin pursuant to the Offer of the issued and to be issued share capital of Wellington; "Admission" means the admission of the New Catlin Shares to the Official List in accordance with the Listing Rules and to trading on the London Stock Exchange's market for listed securities in accordance with the Admission and Disclosure Standards; "Admission and Disclosure Standards" means the requirements contained in the publication "Admission and Disclosure Standards" dated July 2006 (as amended from time to time) containing, inter alia, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's market for listed securities; "Announcement" means this announcement; "Australia" means the Commonwealth of Australia, its territories and possessions and all areas subject to its jurisdiction and any political sub-division thereof; "Business Day" means any day (other than a Saturday or Sunday) on which banks generally are open for business in London (other than solely for settlement and trading in euro); "Canada" means Canada, its territories and possessions and all areas subject to its jurisdiction and any political sub-division thereof; "Catlin" means Catlin Group Limited; "Catlin Bermuda" means Catlin Insurance Company Limited; "Catlin Board", "Board of Catlin" or "Catlin Board of Directors" means the board of directors of Catlin; "Catlin Directors" means the directors of Catlin; "Catlin Group" means Catlin and its subsidiary undertakings excluding Wellington and the Wellington Group; "Catlin Shares" means the common shares of $0.01 each in the capital of Catlin; "Catlin Shareholders" means the holders of Catlin Shares; "Catlin UK" means Catlin Insurance Company (UK) Ltd; "Catlin US" means Catlin Insurance Company Inc.; "Cessation Application" means the application to be made by Wellington pursuant to Lloyd's Major Syndicate Transactions Byelaw for WUAL to cease accepting new or renewal business on behalf of Syndicate 2020 with effect from 31 December 2006; "City Code" or "Code" means the City Code on Takeovers and Mergers of the United Kingdom; "Citigroup Global Markets" means Citigroup Global Markets Limited; "Companies Act" means the Companies Act 1985 as amended; "Conditions" means the conditions to the Offer set out in Appendix I (A); "Disclosure Rules" means the disclosure rules and regulations made by the UK Listing Authority; "Enlarged Group" means the Catlin Group and the Wellington Group following completion of the Acquisition; "First Closing Date" means the date no earlier than 21 days following the posting of the Offer Document to be specified as such in the Offer Document; "Form of Acceptance and Election" means the form of acceptance and election relating to the Offer which will accompany the Offer Document; "FSMA" means the Financial Services and Markets Act 200 as amended; "Further Terms" means the further terms of the Offer set out in Appendix I(B); "Independent Competing Offer" means an Independent Offer which is either announced before the Offer lapses or is withdrawn or is announced following the announcement of another Independent Offer which is itself announced before the Offer lapses or is withdrawn in accordance with its terms; "Independent Offer" means an offer (including by way of a scheme of arrangement) or proposal to acquire more than 50 per cent. of the Wellington Shares (when added to any Wellington Shares already owned or agreed to be acquired by the person making or entering into the offer or proposal) and which: (a) is made or entered into by a person who is not acting in concert with or an affiliate of (as those terms are defined in the Code) Catlin; and (b) does not relate to a reorganisation, reconstruction or redomestication of the Wellington Group and which does not result in a material change in the ultimate ownership of the Wellington Group; "Interim Implementation Regulations" means the Takeovers Directive (Interim Implementation) Regulations 2006; "JPMorgan" means JPMorgan Chase Bank, N.A.; "JPMorgan Cazenove" means JPMorgan Cazenove Limited; "Lexicon Partners" means Lexicon Partners Limited; "Listing Rules" means the listing rules and regulations made by the UK Listing Authority; "Lloyd's" means the Society and Corporation of Lloyd's incorporated by the Lloyd's Act of 1871; "London Stock Exchange" means London Stock Exchange plc; "Mix and Match Facility" means the mix and match facility under which Wellington Shareholders who validly accept the Offer may, subject to availability, elect to vary the proportion of New Catlin Shares and cash they will receive under the Offer; "New Catlin Shares" means Catlin Shares proposed to be issued fully paid to Wellington Shareholders pursuant to the Offer; "Offer" means the offer recommended by the Board of Wellington to be made by Catlin (including the Mix and Match Facility) to acquire Wellington Shares to be on the terms and subject to the conditions set out or referred to in this Announcement and to be set out in the Offer Document and, where the context admits, any subsequent revisions, variations, extensions or renewals thereof; "Offer Document" means the document to be sent to Wellington Shareholders containing the Offer; "Official List" means the Official List maintained by the UK Listing Authority; "Panel" means the United Kingdom Panel on Takeovers and Mergers; "Prospectus" means the prospectus to be issued by Catlin in connection with the proposed issue of New Catlin Shares and applications for Admission of the New Catlin Shares for the purposes of the Offer; "Shares" or "Wellington Shares" means the ordinary shares of 10 pence each in the capital of Wellington; "Special General Meeting" means the special general meeting of Catlin to be convened for the purposes of, inter alia, considering, and if thought fit, approving the Acquisition; "Syndicate 2003" means syndicate 2003 at Lloyd's; "Syndicate 2020" means syndicate 2020 at Lloyd's; "UBS Investment Bank" means UBS Limited; "UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland; "UK Listing Authority" or "UKLA" means the United Kingdom Financial Services Authority in its capacity as the competent authority for listing under Part VI of the FSMA; "US" or "United States" or"United States of America" means the United States of America, its territories and possessions, any State of the United States and the District of Columbia; "Wellington" or the "Company" means Wellington Underwriting plc; "Wellington Board", "Board of Wellington"or "Wellington Board of Directors" means the board of directors of Wellington; "Wellington Corporate Members" means those subsidiaries of Wellington which are registered as corporate members of Lloyd's; "Wellington Directors" means the directors of Wellington; "Wellington Group" means Wellington and its subsidiary undertakings; "Wellington Shareholders" means the holders of Wellington Shares; "Wellington Share Schemes" means any or all of the Wellington Underwriting plc Performance Share Plan, the Wellington Underwriting plc 1996 Approved Executive Share Option Scheme, the Wellington Underwriting plc 1996 Executive Share Option (No. 2) Scheme, the Wellington Underwriting plc Savings Related Share Option Scheme, the Wellington Underwriting Holdings Limited Executive Share Option Scheme, the Wellington Underwriting plc Overseas Share Option Scheme and the Wellington Underwriting plc Deferred Equity Share Scheme; "WSIC" means Wellington Specialty Insurance Company; "WUAL" means Wellington Underwriting Agencies Limited; and "WUI" means Wellington Underwriting Inc.. All references to legislation in this Announcement are to the legislation ofEngland and Wales unless the contrary is indicated. Any reference to anyprovision of any legislation shall include any amendment, modification,re-enactment or extension thereof. Words importing the singular shall includethe plural and vice versa, and words importing the masculine gender shallinclude the feminine or neutral gender. For the purpose of this Announcement, "subsidiary", "subsidiary undertaking","undertaking" and " associated undertaking" have the meanings given by theCompanies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4(A)of the Companies Act). References to "£", "sterling", "p" and "pence" are to thelawful currency of the United Kingdom and references to "$", "dollar", "c" and"cents" are to the lawful currency of the United States of America. This information is provided by RNS The company news service from the London Stock Exchange