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EC News (25th January 2018)

January 25, 2018

Round-up of the weekly news and developments from the global (re)insurance market with stories from AIG, Nexus, Axis and more.

AIG acquires Validus in $5.56bn deal

US insurance giant AIG has struck a deal to acquire Bermudian (re)insurer Validus in a $5.56bn cash deal.

The deal values Validus at $68.00 per share, equivalent to 1.53x stated book value at the end of the third quarter and represents a 45.5 percent increase on Validus’ closing share price on Friday 19 January.

With Validus, AIG gains a treaty reinsurer with a focus on property cat, marine and specialty  (Validus Re), an insurance-linked securities asset manager in AlphaCat, a Lloyd’s platform (through Talbot) and a US crop business (Crop Risk Services), as well as expanded US specialty P&C operations through Western World.

“The acquisition of Validus is a significant step towards AIG’s strategy to deliver profitable growth. The acquisition brings a diverse and complementary set of attractive franchises across specialised products and regions,” the firm said.

"Validus has a lot of pieces that fit us perfectly like a glove and that's why I chose it," AIG president and CEO Brian Duperreault said on a call with analysts.

"The people in it are terrific underwriters, management and executives. They make us better,” he continued, adding that Validus “brings us skills we don’t have”.

The transaction marks AIG's return to M&A, reversing a course of retrenchment after Duperreault has signalled plans to expand the business when he took the helm of AIG in May 2017. On a twelve-month trialling basis as of 30 September 2017, Validus reported net written premiums (NWP) of $2.8bn, according to an investor presentation.  The deal will expand an AIG’s general insurance NWP by 11 percent to $28.8bn.

Commenting on the deal, Duperreault said: “Validus is an excellent strategic fit for AIG, bringing new businesses and capabilities to our General Insurance operation, expanding the bench of our management team and deepening our underwriting expertise,”

"With our global scale and the strength of our balance sheet, I am confident that Validus will thrive within AIG and strengthen our ability to deliver profitable growth for our shareholders as we strategically position AIG for the future.”

Meanwhile, Validus’ chairman and CEO Ed Noonan said: “We believe this transaction offers compelling value for our shareholders and reflects the strength of the business we’ve built together with our talented global team.

“Joining AIG and becoming part of a larger, more diversified organization immediately opens new opportunities for our people and our franchise. Validus will be able to serve clients and brokers in new and exciting ways, which will enhance our ability to grow profitably.”

AIG expects the transaction to be immediately accretive to earnings per share and return on equity.

The deal has been unanimously recommended by both company boards of directors and is expected to close in mid-2018, subject to approval by Validus shareholders and other customary closing conditions.

Nexus appoints Sibthorpe as CEO of insurance and reinsurance

Specialty managing general agency (MGA) Nexus has named Mike Sibthorpe as CEO of insurance and reinsurance as the firm prepares for a potential shareholder liquidity event this year.

Effective April 2018, Sibthorpe will be responsible for the Nexus’ underwriting strategy and underwriting performance and will become a member of the Nexus Group board.

“With Nexus exploring a potential shareholder liquidity event in 2018, Mike’s appointment in a newly created role is an important step in the process to ensuring the Group has the appropriate management structure and governance in place to continue its successful growth,” the company said in a statement.

As part of a wider management reshuffle, Nexus also revealed that, effective April 2018, Colin Thompson will relinquish his role as executive chairman and reassume the position of group CEO, with incumbent CEO Tim Coles moving into the group COO position.  Stuart Rouse will continue as group CFO.

Sibthorpe was most recently chief underwriting officer for AmTrust’s Lloyd’s operation where he was responsible for overseeing the underwriting strategy of the company’s five syndicates following its acquisition of ANV.

Prior to AmTrust, Mike was CEO for WR Berkley Syndicate 1967, having led the establishment of the syndicate in 2009. Before that, he was CEO of Brit Global Markets and active underwriter of Brit Syndicate 2987.

Thompson said: “Bringing in someone of Mike’s calibre is a huge credit to the company and the direction that we are headed. Mike has enjoyed an enormously successful and extensive career throughout the industry, establishing Lloyd’s syndicates, growing businesses and delivering improved underwriting performances”

He highlighted that following three transformational years of rapid growth, Nexus has completed seven acquisitions, grown EBITDA from £2.6mn from 2014 to £10mn in 2017 and increased gross written premiums from £56mn to £175mn over the same period.  

“As Nexus looks ahead to more growth in 2018, Mike’s experience, technical ability and leadership will stand the group in good stead,” Thompson concluded.

Axis unveils revamped operating model

Axis Capital is set to undergo a company-wide reorganisation as the Bermudian (re)insurer continues with its integration of Novae and strengthen its operating model in a bid to increase efficiency and profitability.

The restructure includes the launch of a global underwriting and analytics unit (GUA), the merging of its accident & health (A&H) segment into its core (re)insurance operations and the combination of its Ceded Re and Third Party Capital units into to a single strategic risk-funding department, while also introducing an integrated functional model for both its IT and finance departments.

The new enterprise-wide GUA will be led by Eric Gesick, who has been named global chief underwriting officer (CUO). He currently serves as chief risk and actuarial officer and will continue to report to Axis president and CEO Albert Benchimol in his new role.

Data and analytics head Meghan Anzelc also was promoted to chief analytics officer within the new operation, reporting to Gesick.

Gesick’s current responsibilities will be handled by Daniel Draper, who has been promoted from chief risk analytics officer to chief actuary, and Carol Collins, who moves from head of risk governance to chief risk officer. Both will report to Axis CFO Peter Vogt.

The GUA division will partner with the company’s underwriting, claims, and actuarial teams arming them with greater insights, resources, and tools to deliver even more value and services to clients and distribution partners. This will include leveraging enhanced data and analytics capabilities to help inform decision-making, intelligently applying InsurTech, as well as optimising group portfolio management and capital allocation.

Meanwhile, Axis said that the realignment of its A&H business will help the carrier to deliver synergies in combination with its P&C insurance and reinsurance businesses. As a result of the change, Axis said that A&H CEO Chris DiSipio will leave the firm in April 2018, serving as an advisor to help guide the transition until his departure.

Benchimol said: “We are deeply appreciative of Chris for his leadership in growing the A&H business from a start-up into a profitable $500mn business. We are proud of the achievements of the A&H team and look forward to building on them and continuing the profitable growth of these businesses.”

TigerRisk appoints Beckers to lead European operations

Reinsurance broker TigerRisk has appointed former head of Aon Benfield ReSolutions EMEA Marc Beckers as its new head of European operations.

In his new position, Beckers takes on the role of partner and head of EMEA for TigerRisk Partners, where he will be responsible for growing TigerRisk’s profile and market position in Europe.

He will be based in London and will report to TigerRisk president Tony Ursano, with a dotted line to Hugo Crawley, head of TigerRisk’s London operations.

Beckers is expected to be an employee of both TigerRisk Partners (UK) Limited and TigerRisk Capital Markets & Advisory (UK) Limited.

Beckers began his insurance industry career as an actuary at ING, focused on health and disability insurance. From there he went on to Schroder Salomon Smith Barney where he was a director and actuary working on mergers and acquisitions (M&A) for the insurance and asset management industries. He also served as an advisor to the CEO of Dexia Insurance.

In 2007, Beckers joined Aon Benfield where he first headed up analytics for EMEA and then ReSolutions EMEA, a team dedicated to reinsurance capital solutions and optimisation, at the reinsurance broker. Beckers left Aon Benfield in July 2017.

Commenting on the appointment, Ursano said: “Marc is a highly experienced, analytical and forward-thinking insurance industry executive and we are thrilled to have him join TigerRisk as head of our European operations.”

“His established track record of providing innovative ideas and solutions to European insurers and reinsurers and his long-standing client relationships make Marc an ideal candidate to drive our business further forward in Europe. The combination of his actuarial background, his investment banking expertise, his life insurance and life reinsurance background, and his experience of running EMEA analytics at Aon Benfield, makes him an invaluable resource as we continue to build the leading risk, capital and strategic advisor to our industry.”

TigerRisk CEO Rod Fox added: “Marc is exactly the kind of experienced analytical and strategic thinker that is needed to help our clients in the current operating environment. I am proud to welcome him onto the team and look forward to working closely with him to serve our clients around the globe.”

RenaissanceRe acquires minority stake in Catalina

Bermudian (re)insurer RenaissanceRe has agreed to make a minority investment in run-off specialist Catalina.

RenaissanceRe will become a minority shareholder in Catalina, with the share investment being made through the reinsurer’s ventures unit. The deal comes after it was announced in October last year that global investment firm Apollo had agreed to acquire a majority shareholding in Catalina.

Following completion of the transaction, Aditya Dutt, president of Renaissance Underwriting Managers will join the Catalina board of directors.

RenaissanceRe’s investment will provide strategic benefits to Catalina and help the business to explore a broader range of transaction structures as it continues with its growth strategy that has seen the business grow steadily and consistently over a number of years.

Catalina chief executive Chris Fagan said: “We’re delighted to welcome RenaissanceRe as shareholders in Catalina. They join us at time of significant opportunity to help us capitalize on the continued growth of the non-life legacy sector.

“Together with Apollo, our new shareholders provide us with access to additional expertise and substantial financial resources that will help us to take advantage of the vast array of legacy market opportunities we continue to see, driving our business through the next phase of its growth, and strengthening our position as one of the legacy market’s leading consolidators.”

RenaissanceRe president and CEO Kevin O’Donnell remarked: “We are pleased to partner with Catalina as they have demonstrated a strong, consistent track record in managing legacy businesses. This transaction is consistent with our strategy to expand the suite of capabilities at our disposal to bring to our clients, through partnership with a proven industry leader. We look forward to working with the Catalina team on new opportunities.”

Since being founded in 2005, Catalina has completed 24 transactions, acquiring $5.6bn of non-life insurance and reinsurance liabilities. It had total assets of $3.6bn and shareholders’ equity of $719mn as of 30 September 2017.

The deal expected to close concurrently with Apollo’s previously announced majority investment in the firm, subject to regulatory approval.

Liberty Mutual restructures P&C operations as it disposes of life business

Liberty Mutual has announced a realignment of its P&C underwriting operations as it agreed to sell its life business in a $3.3bn deal.

The reorganised structure will see the establishment of two units.

Liberty Mutual Global Specialty, Ironshore, National Insurance and the Global Reinsurance Strategy Group will be brought together into a single entity called Global Risk Solutions (GRS).

Incumbent Liberty Mutual CFO Dennis Langwell will lead GRS, while Ironshore CEO Kevin Kelley will assume the new role of vice chairman of the newly established unit. Kelley will report to Liberty Mutual CEO David Long.

The company said that Christopher Peirce, currently president of global specialty, will replace Langwell as its CFO.

​Meanwhile, Global Retail Markets (GRM) will combine Liberty Mutual’s existing global consumer markets with its business insurance and accident & health (A&H) organisations formerly in commercial insurance.

​Liberty’s GRM business will offer individual motor, property and A&H products to consumers as well as commercial products. The division will be led by current president of global consumer markets Tim Sweeney.

The structure changes came as Liberty Mutual announced that it had struck a deal to sell its life business to Lincoln Financial Group for approximately $3.3bn.

The companies expect to complete the transaction in the second quarter of 2018, pending regulatory approval.

Long said: “The sale of the life company allows us to fully focus on our property and casualty business.”

“The realignment will make it easier for our customers to access the full breadth of the personal, commercial, specialty and reinsurance products that Liberty has to offer.”

Upon completion of the transaction, Lincoln Financial will retain Liberty’s group benefits business and reinsure Liberty’s individual life and annuity business to Protective Life Insurance Company.

LIIBA puts PPL adoption on 2018 agenda

The London and International Insurance Brokers’ Association (LIIBA) has said it is determined to see the electronic placement platform (PPL) become the predominant distribution tool in the London market by the start of 2019 as it outlined its key priorities for this year.

As part of its agenda for 2018, LIIBA, a trade body founded in 1910 representing Lloyd’s insurance and reinsurance brokers accounting for over 95 percent of the London market’s business, said that it will tackle market modernisation, particularly focussing on the adoption of the market’s electronic placement platform (PPL) to “make London an easier place to do business.”

“PPL is all about improving our approach to placing and reducing our reliance on paper – allowing us to focus on the face to face negotiations for which this market is renowned. They are many myths about the threat of e-placement, so we will shine a light on the significant service improvements it will allow us to deliver to our clients and the very real cost savings that PPL will deliver across the value chain,” remarked LIIBA CEO Chris Croft.

LIIBA also stressed that Brexit was another key priority, highlighting the need for contract continuity and to ensure that EU clients can still access the London Market.

“Much attention has focussed on the decisions of underwriting firms on how they will navigate a post-Brexit marketplace. However, the broking industry also faces major challenges and we are working closely with members to help them make the right contingency plan to protect the interests of their clients. For example, it is critical that we ensure that contracts where the period of insurance runs over the date when the UK leaves the EU remain serviceable” said Croft.

In addition, the trade association said that it will also focus on the FCA’s recently launched wholesale insurance broker market study by working with members and the FCA to furnish the quantity and quality of information necessary to deliver a properly informed review.

“LIIBA’s mission is to ensure that London remains where the world wants to do business by improving its competitive position. 2018 is going to be a pivotal year for the insurance industry in many areas that are critical to that mission and we will be working closely with our members and Board to deliver on our priorities,” Croft added.