LONDON -- Although the underwriting year at Lloyd's of London is drawing to a close, merger and acquisition activity within the market is continuing apace.

U.S. reinsurer General Re Corp. last week announced plans to acquire DP Mann Holdings Ltd., the holding company for DP Mann Ltd., an agency that manages syndicate 435. In addition, General Re will take over DP Corporate Name Ltd., a corporate capital vehicle that provides capacity to the syndicate.

Terms of the deal were not disclosed, though sources at Lloyd's estimated that General Re paid about L100 million ($166.0 million) for the organization.

The deal has yet to receive regulatory approval, but David Mann, active underwriter for syndicate 435 and a director of the agency, was confident the approval process will be complete by year end.

DP Mann is one of the last independent managing agencies left at Lloyd's, and speculation had been circulating in the London market for a number of months that it soon would become part of a large corporate investor.

Due to a history of profitability and the reputation of its underwriters, syndicate 435 has long been viewed as one of the most desirable syndicates in the market. Although it has suffered underwriting losses in some years, it has consistently been able to offset those with prior year surpluses. Thus, it has turned a gross underwriting profit every year that has closed since it was set up in 1984.

In terms of capacity, syndicate 435 is the fifth-largest at Lloyd's for 1998, writing against L234 million ($388.3 million). Under Lloyd's three-year accounting rules, the syndicate's most recent reported result for the 1995 year of account was gross profits of L33.5 million ($55.6 million) against capacity of L193.3 million ($320.8 million).

In 1996, the agency created DP Corporate Name Ltd. to provide dedicated limited liability capacity to the syndicate. DP Corporate Name owns 49% of DP Mann Ltd., the managing agency, and this year has provided the syndicate with L52 million ($86.3 million), or about 22% of its capacity.

As part of the terms of the planned acquisition, General Re will take over DP Corporate Name from the four investors that set it up. When it was launched, Chase Capital Partners, Century Capital Partners of Boston, the Duke University Management Co. of Durham, N.C., and LIMIT P.L.C. together took a 40% stake in the DP Mann holding company and committed, through the corporate vehicle, to replace underwriting capacity withdrawn by traditional names as they exited the Lloyd's market.

"It was pretty inevitable with the shape of the new Lloyd's that we would make a move like this," said Mr. Mann.

Although the deal took place after the capacity auction process, meaning that General Re was unable to purchase syndicate 435 capacity during open auctions, DP Mann had been planning to finalize the deal by the end of this year or at the beginning of 1999.

From that point of view, the announcement comes slightly earlier than Mr. Mann was expecting, he said. "It didn't take long to put the deal together," he said.

A spokeswoman for Stamford, Conn.-based General Re said DP Mann had approached the organization about six months ago.

In a statement, James E. Gustafson, General Re president and chief operating officer, said: "London is the third-largest insurance market in the world and one of vital importance to General and Cologne Re. Our agreement with DP Mann, one of Lloyd's leading and most profitable operations, clearly demonstrates our commitment to the London market and its distribution system. . . .We intend to keep DP Mann's operations intact, while providing the support and security that will enable DP Mann to continue to grow profitably."

General Re owns General Reinsurance Corp. and National Reinsurance Corp. and has a controlling interest in German reinsurer Cologne Reinsurance Co. Between the two of them, General Re and Cologne Re currently have several U.K. operations, some direct reinsurance operations and several London market broker business operations.

This will be General Re's first foray into the Lloyd's market, though Berkshire Hathaway Inc., which is acquiring General Re, owns one-third of Creechurch Underwriting Ltd., an agency managing two small Lloyd's syndicates and a dedicated corporate capital vehicle. Berkshire's acquisition of General Re will create a reinsurance powerhouse, though most reinsurance observers see the deal as having little impact on the market overall (see story, page 3).

Although DP Mann will be bought up by General Re, the Lloyd's operation will remain a separate entity, said Mr. Mann. "The customer should see business as usual at syndicate 435," he said. But "the customer will be secure in the knowledge there will be capacity there as long as we deserve it," he added. The deal with General Re will ensure DP Mann has access to capital to replace traditional names who are resigning from the market and corporate spread vehicles that are focusing on the syndicates managed by their own agencies.

Mr. Mann does not anticipate many cross-flows of business between the managing agency and other insurance and reinsurance organizations under the General Re/Berkshire Hathaway umbrella. Nevertheless, "I would expect that the overall transaction will make us a more attractive marketplace" for buyers, he said. "There is a general flight to quality in difficult times," he added.

Syndicate capacity likely will remain about the same level for next year, said Mr. Mann, and utilization has been high, at about 80% for 1998. During the auctions, the corporate capital vehicle bought up about L20 million ($33.2 million) of capacity through various deals, and ultimately syndicate 435 is expected to be fully funded by DP Corporate Name. For the time being, though, traditional names still make up about one-third of the capital base, contributing about L70 million ($116.2 million) in capacity. DP Corporate Name is expected to put up about the same amount next year as it did in 1998. "It is logical and natural that over a period of time (DP Corporate Name) will reach 100%" of the syndicate's capacity, said Mr. Mann.

Although market conditions are pretty bleak at the moment, Mr. Mann said he anticipates the agency will grow by taking on underwriters for specific classes of business, should the right people become available. "We are about capability rather than size," he said. "It is about people, about the skills. If the people are available with the right skills, we will go into those areas (of underwriting)."