Middleton resigns at critical stage for Lloyd's of London

Insurance loss: Names bemused by departure of man seen as linch- pin in fight to repair battered credibility

JOHN EISENHAMMER

DAVID HELLIER

and JOHN WILLCOCK

Peter Middleton shocked the world's largest insurance market last night by resigning as chief executive of Lloyd's of London two years before his contract was due to expire.

His resignation comes at a critical stage in Lloyd's fight to recover. It is embroiled in complex negotiations over its pounds 6bn reconstruction and renewal programme. Alongside David Rowland, the chairman, Mr Middleton was the linch-pin of Lloyd's attempts to restore its battered credibility, and negotiate a settlement with the thousands of loss-making names who have ravaged the society with litigation and refusals to pay up on their liabilities.

Mr Middleton, 55, takes up the position of chief executive for the UK and Europe at Salomon Brothers, the investment bank, on 1 January. His salary package is believed to be in the region of pounds 750,000.

He leaves Lloyd's formally at the end of this month, and is to be replaced by Ron Sandler, 43, appointed earlier this year to implement the reconstruction and renewal programme.

Sources close to the market said that there had been a deterioration in Mr Middleton's relationship with Mr Rowland. "Everybody will say that this is the insiders pushing an outsider out, but that it absolute rubbish. This was a voluntary decisionand it is a great opportunity for me," said Mr Middleton. He informed Mr Rowland last Friday of his decision.

In August, Mr Middleton said he intended to stay until the recovery of the trouble insurance market was complete. "We [he and David Rowland] have stated that we are not going to leave until we have done all that we have set out to do ..."; unlikely to be before 1997, he said.

Mr Middleton said that Mr Sandler's role in charge of the reconstruction programme, meant the handover should be smooth. "The critical point at the moment is the implementation of the reconstruction and renewal programme and that is what Ron has been doing. Everything is on course, we have Equitas' new management team appointed, it is the beginning of the new Lloyd's."

Mr Sandler moved quickly last night to try to limit the damage of the shock resignation, stressing that the recovery programme remained on course, and that his appointment stood for continuity. "I hope names will understand that Peter left because of the offer of another job, which he regarded as preferable to this one. I hope they will not misinterpret his position, or see this as a statement about the prospects of the recovery programme."

But the shock departure comes as Lloyd's efforts to find a global settlement with litigating names and hive off all its old, loss-making liabilities into a special re-insurance vehicle, Equitas, are on a knife-edge. A host of difficult issues remain to be resolved, with various parties engaged in brinkmanship.

"Lloyd's must be more fragile than we thought. This sends out all the wrong signals to the market," said John Rew, head of the Sturge names' action group. "If the reconstruction of Lloyd's works, then surely it will be an exciting and remunerative place to be yet Peter Middleton has voted with his feet."

Sir Lawrie Magnus of Phoenix Seccurities, who had been involved in the introduction to Lloyd's of corporate capital, said last night: "Ron Sandler is held in high regard both by practitioners in the market and by most corporate capital providers, who now account for more than 25 per cent of the market's capacity."

Mr Sandler was forced out of his last job as chief executive of Exco, the moneybroking firm floated last year. When he resigned, Exco blamed "differences in management style and not getting along with the senior management".