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EC News (7th December 2017)

December 07, 2017

Round-up of the weekly news and developments from the global insurance market with stories from Hyperion, AIG, Hiscox Re and more.

CDPQ acquires stake in Hyperion

Hyperion Insurance Group revealed that long-term institutional investor, Caisse de dépôt et placement du Québec (CDPQ) has agreed to acquire a notable minority stake in the Group.

CDPR will invest over USD$400mn to new growth equity as well as liquidity to existing shareholders.

CDPR will join together with Hyperion as a long term growth partner alongside General Atlantic.

Hyperion management and employees will remain the largest shareholder group.

For the financial year which ended 30 September, the Group reported preliminary unaudited revenue of GBP£535mn and earnings before interest, taxes, depreciation and amortization (EBITDA) of GBP£152mn on a bank reported basis.

Hyperion is set to launch a debt refinancing, which will extend and reprice its existing term loan facility to 2024 and include the issuance of additional primary debt.

In addition, Hyperion will extend its existing undrawn revolving credit facility. In conjunction with the CDPQ investment, this will leave Hyperion well placed to execute on its medium term growth strategy from a strongly capitalised position and with significant free cash, providing over USD$300mn of additional capital for future investments.

Selective acquisitions with a strong cultural fit will continue to play an important role in Hyperion’s growth strategy with a number of deals already in the pipeline.

For the transaction, Morgan Stanley & Co LLC acted as financial advisor to Hyperion and General Atlantic. Weil, Gotshal & Manges served as legal advisor and Linklaters LLP served as legal advisor for CDPQ.

The equity transaction is subject to regulatory consents.

The Board expects to approve Hyperion’s FY17 consolidated audited accounts shortly.

CEO of Hyperion, David Howden said: “CDPQ is a fantastic partner to support us on the next leg of our journey. Their strategy to invest based on long term fundamentals combined with their deep understanding of insurance markets and significant international portfolio, mean they will deliver valuable insight to help direct our future plans, whilst remaining supportive of our independence and of our resolute focus on putting our clients at the centre of everything we do.” 

He continued: “Since General Atlantic’s initial investment in 2013, the Group’s revenue has grown by almost five times, our EBITDA has increased from GBP£36mn to over GBP£150mn, and we have created very significant value for all of our shareholders. GA has been more than just an investor, it has been an active and collaborative growth partner whose intellectual capital, significant technological expertise, global resources and experience have played a central role in our success over the past four years, and I am delighted that they will continue to do so.”

Executive vice-president and head of private equity at CDPQ, Stephane Etroy remarked: “We are pleased to partner alongside David Howden, his management team and General Atlantic to continue Hyperion’s track record of success. Hyperion has a very strong entrepreneurial culture that has consistently yielded superior organic growth. This transaction allows us to support the Group in its global growth strategy while at the same time benefiting from a stable and counter-cyclical industry, together with a high-quality partner who shares our long-term vision.”

Managing director and co-head of EMEA, General Atlantic, John Bernstein, said: “Over the last four years we have enjoyed a strong working relationship with Hyperion over a period in which the Group has delivered market-leading organic growth, a transformational merger with RKH, and significantly invested in embracing technology and transforming its operational platform. This unique group has a bright future and we look forward to working with CDPQ and Hyperion as it continues its rapid growth in the provision of leading insurance services to its customers globally.” 

AIG appoints Bolt as new CUO

AIG has named Tom Bolt as its new Chief Underwriting Officer (CUO), general insurance.

As CUO, Bolt will be responsible for developing a global framework for underwriting standards, authority and structure that is aligned with AIG’s overall risk appetite.

Expected to join the company in January 2018, Bolt will report to CEO, general insurance, Peter Zaffino as a member of the General Insurance Executive Leadership Team.

He brings over 30 years’ experience within the insurance and reinsurance industry.

Prior to joining AIG, Bolt served at Berkshire Hathaway Specialty Insurance as president and CEO of the U.K. and Southern Europe, and as a member of Berkshire Hathaway International Insurance Ltd.’s board of directors.

Before that he was director of performance management at Lloyd’s of London and managing director of Marlborough Managing Agency at Lloyd’s.

Before joining Lloyd’s, Bolt spent 25 years at Berkshire Hathaway where he assumed a number of senior executive roles.

Commenting on the appointment, Zaffino said: “I am very pleased to welcome Tom to AIG,”

“He is an exceptionally talented leader with deep industry expertise and a proven track record of delivering outstanding financial and operational performance. Tom will bring strong discipline to our underwriting and pricing decisions and will play a key role in building AIG’s data and analytical capabilities to empower our underwriters. I look forward to working with Tom to drive general insurance’s underwriting strategy and position it for profitable growth.”

Bolt said: “I am excited to be joining AIG at such a pivotal time in its history. I look forward to working with Peter and the general insurance executive leadership team to define consistent, global underwriting standards that achieve a well-balanced portfolio and deliver strong and sustainable financial performance.” 

Hiscox Re appoints McConnell as director of underwriting

Hiscox has appointed Megan McConnell as director of underwriting for Hiscox Re in London. 

McConnell will become joint active underwriter for Syndicate 33 and active underwriter for Syndicate 6104 and will join the Hiscox Syndicates Limited Board, subject to regulatory and immigration approval. 

In her new role, which will see her relocate from Colorado to London, McConnell will oversee the Hiscox reinsurance underwriting team in London and play a leadership role in the team’s ambitions to innovatively match reinsurance risk with capital. 

Strengthening an already strong team, she will help the business to drive the deregulating US flood market with its new product, FloodXtra, and drive further growth in specialty lines such as cyber and terrorism. 

McConnell joins the company from Paraline, where she was Active Underwriter of Paraline (formerly ICAT) Syndicate 4242 and Special Purpose Arrangement 6123. 

For the past 12 years she has built up a commercial and personal lines insurance business and managed portfolios from a pricing, underwriting, operations, marketing and distribution perspective.  

Since 2010 she has also worked on strategic business planning for the Lloyd’s Syndicate including their reinsurance purchasing strategy. 

Hiscox Re and ILS CEO, Mike Krefta commented: “Megan is an exciting addition to our reinsurance team. Her experience of running a Syndicate was desirable to us and we will benefit from the fresh thinking she will bring.” 

AGCS boosts UK cyber division with two senior appointments

Allianz Global Corporate & Specialty (AGCS), a division of global insurer Allianz is strengthening its UK cyber division with two senior appointments.

Underwriting manager for financial lines at AGCS, Yogesh Virji, has been promoted to lead its UK cyber division and Hui Yu has been appointed as senior underwriter.

Virji has over 20 years of financial lines underwriting experience in cyber, directors and officers liability, pension trustee liability, employment practices liability, crime, and public offering of securities insurance.

Yu joins the company from Principia Underwriting and will begin the role in 2018, reporting to Virji.

In the coming years, the international cyber insurance industry is expected to expand dramatically.

ACGS said that the appointments support its commitment to building its expertise in the cyber arena.

The growth of the UK cyber division comes after AGCS recently announced a partnership with cyber analytics and modelling firm, Cyence.

Kevin Northcott, AGCS head of financial lines regional division London, commented; “The appointments of Yogi and Hui highlights our commitment to providing our clients with a superior underwriting offering. Supported by our dedicated cyber risk engineering capabilities and wider risk management solutions, including AGCS’ cyber risk panel, I am confident their skills and experience will help us strengthen our relationships with partners in 2018.”

Emy Donavan, AGCS global head of cyber, said; “These appointments enhance the team as we look to take our cyber proposition into the next phase. Cyber incidents topped the list of concerns for UK risk experts for the second year running in the most recent Allianz Risk Barometer. Recent cyber-incidents have also revealed how vulnerable even well-prepared businesses can be to cyber threats. The trend towards the increase in cyber regulation and the evolution of risks businesses face make it more important than ever for companies of all sizes and in all industries to review their cyber security and resilience, and consider cyber insurance as part of their risk management strategy.” 

The Hartford to sell Talcott Resolution

The Hartford has entered into a definitive agreement to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group.

Total consideration to The Hartford is USD$2.05bn, comprised of cash from the investor group, a pre-closing cash dividend, debt included as part of the sale, and a 9.7 percent ownership interest in the acquiring company.

The total consideration amount does not include USD$1.4bn in dividends previously paid by Talcott Resolution in 2017. Subject to regulatory approval and other closing conditions, the sale is expected to close in the first half of 2018.

Under the terms of the sale agreement and subject to regulatory approval, the investor group will create a new company that will purchase Hartford Life, Inc. (HLI), the holding company for the Talcott Resolution operating subsidiaries, for a net cash payment of USD$1.443bn.

The Hartford will receive a 9.7 percent ownership interest, valued at USD$164mn, in the new company.

Subject to regulatory approval, The Hartford also expects to receive USD$300mn in a pre-closing dividend from Talcott Resolution and will reduce its long-term debt by $143mn as debt issued by HLI will be included as part of the sale.

Additionally, The Hartford will keep hold of Talcott Resolution tax benefits with an estimated GAAP book value of USD$950mn, which will be available for realization subject to the level and timing of The Hartford’s taxable income.

As a result of The Hartford’s election to retain certain tax benefits, the company will not recognize a tax capital loss on the sale. Based on the terms of the sale and the retention of the tax attributes, The Hartford estimates that the sale will result in a GAAP net loss of approximately USD$3.2bn, after tax, which would be recorded in discontinued operations in fourth quarter 2017.

The estimated loss on sale and the estimated retained tax benefits and our ability to realize such benefits are based on current tax law and are subject to a final determination of the tax basis of the operations sold. Beginning in fourth quarter 2017 and continuing until closing of the transaction, the results of operations of Talcott Resolution will be reported as discontinued operations for all periods presented in The Hartford’s financial statements.

Before the closing of the transaction, the company’s Group Benefits and Mutual Funds subsidiaries, which are currently subsidiaries of HLI, will be transferred to another Hartford subsidiary and will not be part of the transaction.

As well as this, immediately after closing, Talcott Resolution will reinsure a portion of its fixed annuity, payout annuity and structured settlement businesses to a subsidiary of Global Atlantic Financial Group (Global Atlantic).

Following the sale, Hartford Investment Management Company (HIMCO), The Hartford’s investment management group, will continue to manage a significant majority of Talcott Resolution’s investment assets for an initial 5-year term. HIMCO also will be retained by Global Atlantic to manage certain assets associated with the post-closing reinsurance agreement.

As part of the transaction, approximately 400 Hartford employees will become employees of the new company, located at offices currently owned or leased by The Hartford in Windsor, Connecticut, and Woodbury, Minnesota.

The Hartford’s financial advisors for the transaction are J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC and the company’s legal advisor is Sidley Austin LLP. The financial advisor for the investor group is BofA Merrill Lynch. 

Ironshore announce management changes following Boren retirement

Ironshore has announced the retirement of industry veteran, Joseph Boren, chairman of Ironshore Environmental and president of US field operation as of the end of this year.

Current president of Ironshore International and Head of Regional Distribution, David Frediani will succeed Boren’s role as president of U.S. field operations, strategic relations and global marketing, reporting to Shaun Kelly, president of Ironshore, Inc. and CEO of the company’s U.S. operations.

Frediani, who has served as president of Ironshore International since 2012, will now be responsible for overseeing marketing and distribution of all specialty lines to both retail and wholesale markets throughout Ironshore’s operational platform.

Prior to joining Ironshore, Frediani’s professional tenure included thirty years at Marsh, with primary international responsibilities focused on strategic oversight, client relationships, business development and marketing.

Boren’s professional career of almost a half century’s experience was dedicated primarily to the environmental industry. 

Boren is credited with elevating industry awareness of environmental risks impacting virtually every commercial industry sector on a global basis.

He joined Ironshore in 2009 as chairman of Ironshore Environmental to launch the unit’s offering of products and services structured to address environmental incident and liability risks.

In 2011 he was appointed as president of U.S. field operations, whereby he built out Ironshore’s nationwide distribution platform encompassing 18 offices in six geographic regions.

Boren will continue his active involvement in New York area not-for-profit organisations, serving as chairman of Riverkeeper, an environmental watchdog protecting the Hudson River, and as board member of the New York City all-stars project initiative, a national skills development program for inner-city teenagers and young adults.

CEO, Kevin Kelley said: “I have had the privilege of working directly with Joe for many years during our respective careers within the insurance industry.”

“Joe is a highly respected industry leader and his commitment to environmental issues and protective actions have made an indelible impression on how our industry responds to this precarious sector of the market.”  

Compre Group CEO is stepping down

Independent insurance and reinsurance legacy specialist, Compre has announced its founding director Nick Steer will be stepping down from his role effective March 2018.

Steer will remain within the group, advising on further acquisitions as non-executive deputy chairman.

Subject to relevant regulatory approvals, Will Bridger, managing director of acquisitions and Mark Lawson, group actuarial director, will jointly succeed Steer and take on the role as co-CEOs.

Their combined complementary skills will ensure the continued successful expansion of the business and future development of group strategy.

From 1 January 2018, Philipp Kleyser will also be appointed to the group in Germany in a new business role and will become a director of its reinsurance subsidiary, Hamburger Internationale Rückversicherung-AG.

Kleyser joins from EY where he was most recently served as executive director, providing transaction and restructuring advisory support for the insurance industry in Germany and Europe.

Commenting on stepping down from his CEO role, Steer said: “Next March I will have been with the business for 32 years and CEO for the last nine. During that time, the group has completed 11 company and 27 portfolio acquisitions in 11 different countries across Europe. It has grown to be a well-respected and trusted acquirer of non-life insurance and reinsurance legacy business. I feel now is the right time to step back as CEO and let the team, under new leadership, build on the very stable platform and take the business forward. I look forward to contributing to the continued success of the business in my new role.”

Chairman of Compre Group, Tom Colraine said: “We are very grateful to Nick for his leadership over many years, and are pleased to have his continued involvement as deputy chairman. The Board are delighted to be promoting Will Bridger and Mark Lawson as co-CEOs. Their joint role plays well to Will and Mark’s respective leadership strengths and their combined experience will support the continued strong development of the business.”