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EC News (11th January 2018)

January 11, 2018

Round-up of the weekly news and developments from the global insurance market with stories from AmTrust, JLT, Beach & Associates and more.

Karfunkel-Zyskind family and Stone Point propose taking AmTrust private

AmTrust’s founding family and private equity firm, Stone Point Capital, have jointly proposed taking the US insurer private in a deal valued at $1.37bn.

The deal proposes that the Karfunkel-Zyskind family (comprising AmTrust chairman and CEO Barry Zyskind, George Karfunkel and Leah Karfunkel) and Stone Point acquire all the outstanding 57 percent of AmTrust shares that the Karfunkel-Zyskind family does not already own or control.

The proposed cash purchase price of $12.25 per share values the company at around $2.4bn and represents a 20.8 percent premium over AmTrust’s closing stock price on 8 January.

Both parties said they believe the proposed transaction will provide AmTrust’s common stockholders with immediate liquidity and certainty of value at a significant premium to the current share price, adding that the deal would allow the carrier to focus on the long term without the emphasis on short-term results.

Since the announcement, the board of AmTrust Financial Services has appointed a special committee to consider the proposal. The company said it would not move forward with any transaction unless it is approved by the special committee.

"Any transaction would be subject to a non-waivable condition requiring the approval of a majority of the shares of the company not owned or controlled by the Karfunkel-Zyskind family, senior management or their respective affiliates,” the firm said in a statement. Willkie Farr & Gallagher will serve as the independent legal adviser to the special committee.

If the special committee does not recommend, or the stockholders of AmTrust do not approve, the proposed transaction, the Karfunkel-Zyskind family said it intends to continue as long-term stockholders of AmTrust.

The proposed transaction follows a turbulent year for the carrier, which included a delay in its 2016 results and an announcement that it would have to restate its financials between 2014 and the first nine months of 2016 and reports circulating about an SEC probe.

As a result, the carrier has been punished by investors, with the company’s share price losing almost two thirds of its value in the last year, falling to $10.14 on 8 January 2018 from a 52 week high of $27.93.

Clarke named global CEO of JLT Specialty

London-listed broker JLT has promoted Lucy Clarke to the newly-created role of global CEO of JLT Specialty.

Effective April 2018, Clarke’s new remit will cover all the group’s business activities apart from reinsurance broking and employee benefits. She will report to group CEO Dominic Burke.

Clarke joined JLT in 2002 and leads JLT Specialty's energy and marine teams. She was appointed as deputy CEO of JLT Specialty in September 2015 and joined the group executive committee a year later.

The broker said that the creation of this new position reflects the increasing scale and importance of JLT’s Specialty insurance business.

This followed the completion of strategy review last year that placed a renewed emphasis on collaboration across the company’s divisions, regions and industry practices.

“Simplifying the structure of the group’s operations and management by combining all insurance broking activities under the JLT Specialty banner will better equip the group to realise its mission to become the leading global specialist risk adviser and broker,” JLT said in a statement.

Commenting on the appointment, Burke said: “I have every confidence that Lucy’s leadership of JLT’s global Specialty businesses will drive the growth of our market share and support our strategy to become the leading global specialist risk adviser and broker.”

Acrisure to acquire Beach & Associates

(Re)insurance broker Beach & Associates is to be acquired by US retail broker Acrisure, it has been announced.

The deal will see Acrisure acquire 100 percent of Beach’s equity from existing shareholders, which includes Jeff Greenberg’s private equity firm Aquiline Capital Partners and current and previous Beach management.

The financial terms of the transaction were not disclosed.

Under its new ownership, Beach will retain its name, identity and unique approach and will continue to operate as an independent advisory and transactional broking business within Acrisure, with the existing management team, led by group CEO Grahame Millwater, remaining in place following the transaction.

Furthermore, Millwater and the remainder of the Beach management team will become shareholders in Acrisure upon completion of the deal.

Aquiline acquired a majority stake in Beach toward the end of 2014, when it then said Beach’s senior partners would own approximately 15 percent of the company.

Commenting on the acquisition Millwater said: “It is difficult to imagine a more suitable way for us to transform from private equity ownership than to become part of such an extraordinary business as Acrisure.

“The cultural fit is remarkable, our business ambitions are aligned and we have a deep regard for Acrisure’s management team and their strategy.”

“This transaction gives both us, and our clients, long term clarity and we are excited about being afforded the support to pursue ambitious growth plans. Aquiline has been a deeply supportive investor and we are grateful for their contribution to our success so far,” he added.

Acrisure CEO Gregory Williams added: “For our first acquisition outside North America, we were looking for a strong management team, international reach and significant reinsurance and insurance portfolio expertise.

“We look forward with real enthusiasm to both supporting Beach’s growth and to partnering with a world-class executive team as we grow our collective business.”

Meanwhile, Aquiline chairman and CEO Greenberg remarked: “We have been delighted to have been associated with Beach over the past 3 years.

“Grahame and the team are first rate insurance and reinsurance professionals, and they have found an ideal solution for their next stage of development in a future partnership with Acrisure. We wish them all the best for the future.”

The transaction is expected close in the first quarter of 2018, subject to regulatory approval.

Axis receives approval to merge managing agencies

Axis Capital has received authorisation from Lloyd’s for Axis Managing Agency to take on the management and oversight of Novae’s Syndicate 2007 and special purpose syndicate (SPS) 6129.

The authorisation creates a single managing agent structure for Axis’ Lloyd’s operations, with Novae Syndicate 2007 and SPS 6129 now operating alongside Axis Syndicate 1686, which is currently managed by Axis Managing Agency.

Axis also plans to consolidate all of its Lloyd’s business into Axis Syndicate 1686, under the management of Axis Managing Agency, which it expects to complete by 1 January 2019.

Mark Gregory, CEO of Axis Managing Agency and the carrier’s international insurance division said: “This marks an important milestone in our continued integration of Axis’ international specialty insurance business with Novae. We look forward to continuing to provide our customers with a diversified and balanced portfolio of specialist classes.”

Fidelis promotes Coulson to UK CUO

Fidelis has promoted Richard Coulson to chief underwriting officer (CUO) of its UK arm, Fidelis Underwriting Limited (FUL).

He will report to FUL CEO Daniel Burrows, effective immediately.

Coulson joined Fidelis in 2015 as head of specialty and was later appointed director of FUL Underwriting in 2017.

Prior to Fidelis, he served as executive director of political risk, structured credit and surety at RK Harrison. During his career, he has also held positions at MMC Capital, Marsh, Hiscox and JLT.

Commenting on the promotion, Burrows said: “Rich has ably demonstrated his underwriting acumen and a talent for developing innovative products. He has been integral to the success and growth of FUL’s business. I am delighted to confirm his appointment to this role.”

Beale to succeed Philipps as MS Amlin CEO

MS Amlin has announced that chief underwriting officer Simon Beale will succeed Charles Philipps as CEO of the (re)insurer following his retirement in April.

Beale will become deputy CEO with immediate effect before taking the helm on 1 April 2018. The carrier said that chief risk officer James Illingworth will replace Beale as CUO, with Martyn Rodden moving up to chief risk officer from the deputy position.

Masahiro Matsumoto, senior executive officer and head of international operations of Mitsui Sumitomo Insurance Company, said: "Simon Beale has the full support of MSI and the MS&AD Group and I am looking forward to working closely with him to develop MS Amlin as a core component of our international strategy."

Philipps retires after nearly 19 years as CEO of the carrier, originally joining Amlin in 1997 as group finance director, before being appointed CEO in 1999. During his tenure, he oversaw Amlin’s £3.5bn sale to Japanese heavyweight Mitsui Sumitomo in 2015.

MS Amlin chairman Shonaid Jemmett-Page added: “We are pleased to have been able to fill these critical roles internally and are confident that, under Simon’s leadership, MS Amlin will maintain its significant status while developing strategically as part of the wider MS&AD Group.

“As CEO for nearly 19 years, Charles built MS Amlin from a Lloyd’s syndicate to an impressive international Group. We wish him a well-earned and happy retirement.”

Korean Re seeking to establish Zurich office in 2019: reports

Korean Re is looking to establish a new local branch in Zurich as the reinsurer looks to expand into the European market, according to local reports.

Korea’s Pulse News reported that the Korean Re aims to commence operations at its Zurich branch in June 2019.

“The Swiss entity will play a huge role in boosting our premium volume in Europe from the current $200mn to more than $300mn by 2025,” a Korean Re official told the publication.

In 2015, the top 10 reinsurer made its entry into Lloyd’s market after establishing special purpose syndicate (SPS) 6050 as part of a strategic partnership with Beazley, with SPS 6050 writing a whole account quota share of Beazley syndicates 623 and 2623 and Beazley taking a quota share of Korean Re’s commercial lines book.

According to Pulse News, Korean Re is also awaiting approval from Chinese authorities for its Shanghai entity having filed an application in November 2014.

The approval process in China usually takes two to three years but its application has been delayed due to the lengthy process required by the China Insurance Regulatory Commission.

MS Amlin creates $60mn reinsurance sidecar

MS Amlin has launched a new Bermuda-domiciled special purpose reinsurer, Viribus Re, which will provide collateralised capacity support to Syndicate 2001’s global reinsurance portfolio in 2018.

The carrier said that the reinsurance sidecar has secured capital commitments in excess of $60mn from several third-party investors, with MS Amlin itself committing $5mn.

Viribus Re has entered into a quota share agreement with MS Amlin, under which it will reinsure a share of MS Amlin’s worldwide property-catastrophe excess-of-loss portfolio. The cover incepted on 1 January.

Global managing director of reinsurance at MS Amlin, James Few commented: "This is an important long-term strategic initiative for MS Amlin as we continue to seek ways to build capacity and relationships with capital market partners, whilst providing us with greater scope and flexibility to support the evolving needs of our clients.

“We are delighted to have secured funding for Viribus Re from a range of new partners whom we look forward to working with closely in the future."

MS Amlin follows in the footsteps of both Chaucer and Brit, who have also recently launched sidecars. Last month, Chaucer established a $95mn collateralised reinsurance sidecar called Thopas Re, while Brit announced the launch of Sussex Re, a collateralised reinsurance vehicle with an initial capacity of $100mn.

Aon Securities acted as sole structuring agent and placement agent for Viribus. Willkie Farr & Gallagher UK acted as deal legal counsel for the transaction.