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Recommended cash offer by Liverpool Victoria Insurance Company Limited for Highway Insurance Group Plc

Summary

• The Boards of Liverpool Victoria Insurance Company Limited ('LVIC’) and Highway Insurance Group Plc ('Highway') are pleased to announce the terms of a recommended cash offer, to be made by LVIC, for the whole of the issued and to be issued share capital of Highway
• Under the terms of the Offer, Highway Shareholders will receive, for each Highway Share held, 73.35 pence in cash. Highway Shareholders will also receive the interim dividend of 1.65 pence per share with respect to the six months ended 30 June 2008 announced today by Highway in the Interim Results Announcement, and payable on 2 October 2008 to Shareholders on the register on 5 September 2008. In aggregate therefore, under the terms of the Offer, and inclusive of the Interim Dividend, Highway Shareholders will receive, for each Highway Share held, 75 pence in cash.
• The Offer values the entire issued share capital of Highway at approximately £150 million.
• The Offer represents a premium of approximately 47 per cent. to the Closing Price of 49.75 pence per Highway Share on 26 August 2008, being the last Business Day prior to Highway announcing that it was in discussions regarding a possible offer for Highway; and a premium of 45 per cent. to the average of the Closing Prices over the 30 Business Days up to and including 26 August 2008 of 50.63 pence per Highway Share.
• LV believes that there is strong industrial logic to a combination of Highway and LV’s general insurance businesses. The Acquisition will help to accelerate LV’s ambitions in the broker underwriting channel, adding scale and expertise as well as broadening the product range. The Enlarged Group will have a compelling proposition in the broker channel, with brokers benefiting from the Enlarged Group’s wider product range, enhanced operational scale and deeper financial resources.
• The Board of Highway, which has been so advised by Lexicon Partners, considers the terms of the Offer to be fair and reasonable. In providing its advice to the Board of Highway, Lexicon Partners has taken into account the commercial assessments of the Board of Highway.
• Accordingly, the Highway Directors intend unanimously to recommend the Offer and have irrevocably undertaken to accept the Offer in respect of their entire beneficial holdings of Highway Shares, which amount in aggregate to 908,347 Highway Shares, representing approximately 0.44 per cent. of Highway’s existing issued share capital. These irrevocable undertakings will continue to be binding if any higher Independent Competing Offer is made for Highway unless the Offer lapses or is withdrawn without having become wholly unconditional.
• The Offer Document, containing further information about the Offer, will be posted to Highway Shareholders as soon as practical and, in any event, within 28 days of this announcement.
• Fenchurch Advisory Partners is acting as exclusive Financial Adviser to LV. Shore Capital Stockbrokers is acting as corporate broker to LV. Lexicon Partners is acting as exclusive Financial Adviser to Highway. Numis Securities is acting as corporate broker to Highway.
  

Mike Rogers, Group Chief Executive of Liverpool Victoria Friendly Society Limited, said:

“General insurance is central to LV’s growth plans and our stated ambition is to become a top five insurer in our chosen markets by 2012. This transaction has the potential to accelerate that aim, giving us considerably greater scale in the broker channel.

“Our general insurance management team has a strong track record of successfully acquiring and building businesses, and delivering value. Highway is highly complementary to our existing general insurance operations and will provide a strong platform for growth.

“This offer for Highway follows a series of strategic acquisitions we have made over the last couple of years, which have helped to transform the LV business overall and its future prospects."

Andrew Gibson, Group Chief Executive of Highway Insurance Group Plc, said

“This transaction represents an attractive financial result for Highway’s shareholders.

“The Board also believes that this will be a good overall outcome for Highway’s customers and employees. Highway and LV share important values, being strongly relationship driven and committed to technical and service excellence. The combined business will also have greater resources to capitalise on opportunities in the broader general insurance market.”

Enquiries:

Liverpool Victoria Friendly Society Tel: 01202 502304
Mike Rogers, Group Chief Executive

Fenchurch Advisory Partners (Financial adviser to LV) Tel: 020 7382 2222
Malik Karim
Richard Locke

Shore Capital Stockbrokers (Corporate broker to LV) Tel: 020 7408 4080
Simon Fine
Pascal Keane

Citigate Dewe Rogerson (PR adviser to LV) Tel: 020 7282 2851
Grant Ringshaw 07534 220614

Highway Insurance Group Plc Tel: 01277 266 298
Andrew Gibson, Group Chief Executive

Lexicon Partners (Financial adviser to Highway) Tel: 020 7653 6000
Mark Hennessy
Ollie Clayton

Numis Securities (Corporate broker to Highway) Tel: 020 7260 1000
Tom Booth

M:Communications (PR adviser to Highway) Tel: 020 7153 1269
Jonathan Gollins
Marylène Guernier

This summary should be read in conjunction with the full text of the Announcement.