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EC News (28th June 2018)

June 28, 2018

Round-up of the weekly news and developments from the global (re)insurance market with stories from QBE Re, Sirius, Willis Towers Watson and more.

Postlewhite resurfaces as deputy CUO at QBE Re

Former CEO of Aspen's primary insurance business, Stephen Postlewhite, has been appointed deputy chief underwriting officer (CUO) at QBE Re.

He will join QBE’s reinsurance business on 1 November and will report to the carrier’s reinsurance CUO Jonathan Parry.

Postlewhite most recently served as chief executive of Aspen’s insurance business since mid-2016, leaving the company in January of this year.

Prior to that, he was Aspen Re CEO for nearly two years and has also served as chief actuary and chief risk officer during his 15 year career at Aspen.

Commenting on the appointment, Parry said: “I am delighted that Stephen is joining QBE Re. He brings considerable experience to this key role and will be an important addition to our business.”

Sirius to go public through Easterly merger

Sirius International has agreed to merge with US-listed special purpose acquisition firm Easterly Acquisition in a deal that will see Sirius become a publicly listed company.

Under the terms of the agreement, Easterly would merge with a subsidiary of Sirius Group and become a wholly owned subsidiary of the company.

Easterly’s common stock would be exchanged for Sirius Group’s common shares at 1.05x Sirius Group’s pro forma diluted GAAP book value per share as of 30 June 2018, with the proposed all-stock transaction valuing the firm at $2.2bn.

Following the stock swap, current Easterly stockholders will own around 7 percent of the combined company when the transaction closes.

Upon completion of the merger, Sirius Group’s common stock will be traded on the NASDAQ.

Sirius said it plans to grow through casualty, primary and life reinsurance lines once it becomes a publicly traded company.

According to an investor presentation, the global, multi-line carrier is expecting to increase gross written premiums from a projected $1.90bn in 2018 to around $2.28bn in 2020, with the share of “high return growth (re)insurance” set to increase from 7 percent to 15 percent over the period.

In conjunction with the merger announcement, Sirius revealed that its agreement to acquire a controlling interest in Israeli insurer Phoenix Holdings will terminate on or prior to 2 July 2018.

This comes seven months after Sirius struck an agreement with Israeli energy conglomerate Delek Group to acquire an initial 4.9 percent stake in Phoenix Holdings, with an option to purchase Delek’s remaining 47.4 percent interest in the business, with the transaction subject to regulatory approvals.

Commenting on the deal, Sirius Group president, CEO and chairman Allan Waters remarked: “We are pleased to become a public company though our partnership with Easterly,

“Access to the public equity markets will facilitate and accelerate our future growth via M&A transactions and organically.”

“We are excited to bring a company of the scale and stature of Sirius into the public markets,” said Avshalom Kalichstein, CEO of Easterly. 

“We believe this transaction will offer tremendous value to our shareholders,” he concluded.

The merger has been approved by the boards of directors of both Sirius Group and Easterly and is expected to close at the end of the third or the beginning of the fourth quarter of 2018, subject to any necessary approvals.

Sirius Group is a Bermuda-based holding company with (re)insurance operating subsidiaries in Bermuda, Stockholm, New York and London. It wrote $1.4bn of gross premiums in 2017.

Sirius Group’s principal equity holder is CMIG International, the Singapore-based investment arm of China Minsheng Investment Corporation.

Willis Towers Watson ready for more deals: Haley

Willis Towers Watson is now ready to do more M&A deals, the broker’s chief executive John Haley has told The Financial Times.

This comes nearly three years after Willis agreed an $18bn merger with Towers Watson, with Haley telling the publication that the process of bringing the companies together was now complete.

“For the first two or three years you can’t really contemplate other acquisitions,” Haley told the FT in an interview. 

“We were really bringing together three organisations. We had a lot of work to do.” 

However, with the merger complete, Haley said that he was now ready to look for other M&A targets.

“When we scan the horizon, we could acquire someone in any of the areas that we’re [already] in,” he noted.

He said that there were no specific geographic gaps that the company was looking to fill, adding that acquisitions would be in the areas or services “adjacent” to where the company already operated.

Haley said the potential for deals would be measured against the expected returns for using surplus cash for share buybacks.

The FT reported that Willis Towers Watson had bought back $1.1bn of shares since the merger in 2015 with Haley saying that the firm expected to buy back a further $600mn-$800mn of its own stock this year.

“At the moment we feel our stock is undervalued,” he added.

Prifti leaves TMK amid A&H reshape

Tokio Marine Kiln (TMK)’s head of accident and health (A&H) Tim Prifti has resigned as the carrier undergoes a restructure of the department.

In a statement, TMK said that it is in the process of “reshaping”its A&H division so that“it aligns more effectively with the longer-term strategic direction” that the company wants to take in this area.

As a result, Prifti has exited the business after what TMK called “a long and successful career with the company”. He has been with the carrier since 1990, according to his LinkedIn profile.

TMK said that Prifti will be replaced by Holly Strettle on an interim basis, who has been with carrier since 2003 and currently serves as a commercial property, US motor and contingency underwriter. She is also chair of TMK’s conduct risk team.

“[Strettle] is a well-known figure in the market and will bring stability and continuity to the team and will work to refocus the portfolio in its new direction,” the company said.

“TMK remains fully committed to its A&H business and looks forward to its ongoing growth and development,” the carrier concluded.

Tokio Marine seeks Asian deals with $9bn M&A warchest: report

Tokio Marine has set aside a $9bn warchest for overseas M&A and is eyeing deals in Asia as European and US plays are becoming more expensive, according to a report.

Tokio Marine chief executive Tsuyoshi Nagano told Reutersthat the Japanese insurance giant was now looking to double Asia’s contribution to its overseas profits as it looks to build “a stable business by diversifying geographically and operationally."

Just last week, Tokio Marine struck a deal to acquire IAG’s Thai and Indonesian businesses for $390mn, with Nagano stating that the carrier was on the hunt for more M&A opportunities in Asia.

“As overseas business profits are nearing 200bn yen, we would like to raise the proportion of Asia (outside Japan) to 20 percent or more from less than 10 percent now,” Nagano said.

“We are always considering strategic options in countries like India, Indonesia, Thailand, Malaysia and the Philippines,” he added.

Although Nagono did not name any targets in particular, he said: “There are companies we have in mind, but it’s not easy, it will take time.”

Southeast Asian countries are becoming increasingly attractive to overseas carriers, where strong economic growth, growing middle-class and low insurance penetration in the region are providing solid growth opportunities.

Whilst Nagano said that the company will also continue to look for deals in the United States and Europe, he cautioned that acquisitions were growing too dear.

“We have to be careful not to overpay,” he told the publication.

Tokio Marine has made a number of notable acquisitions in the US and Europe over the past decade, including its $7.5bn acquisition of US speciality insurer HCC in 2015, its $2.7bn purchase of Delphi Financial Group in 2012 and its £442mn deal to buy Lloyd’s carrier Kiln in 2008.

Overseas earnings will likely contribute 45 percent of the company’s total profits in the year to March 2019, the company said.

Folgate revived as it receives UK insurance licence

Folgate Insurance Company has received regulatory approval to begin writing primary insurance and reinsurance business in the UK once again.

Folgate is owned by MGA APC Underwriting, which acquired the UK insurer in 2014 after it was put into run-off by its former owner, Towergate, in 2002. Folgate was originally established in 1877.

Folgate was granted its licence by the UK’s Prudential Regulation Authority (PRA) on 6 June and expects to start writing SME business in the UK and Europe in January 2019.

All business written through Folgate will be underwritten by managing agent APC. According to APC, the set-up will be similar to how Lloyd’s syndicates operate.

APC said that it will transition its staff, operations and the majority of its business lines over to Folgate over the next two years.

All business written will be via brokers in the UK.

Folgate will be led by APC CEO Brian Russell, who has been in charge of the business since its inception 25 years ago.

Ian Russell, APC’s CUO, Jon Bates, APC’s COO and Zoe Spicer, CFO for APC, have joined the Folgate executive board.

“We believe this is the first time a UK insurer has been set up to operate like a Lloyd’s syndicate, by using APC as a managing agent,” remarked Russell.

“It has always been an ambition to move from a Managing General Agent (MGA) into an insurer,” he added. 

“Folgate has a strong track record as an established insurer with traditional values. I look forward to driving the Folgate business forward, working with a very talented team, whilst maintaining the values established in Folgate’s 138-year old history,” Russell concluded.

AmTrust shareholders green light go-private deal

AmTrust investors have approved a $2.95bn deal proposed by the firm’s founding family and private equity firm, Stone Point, to take the company private.

The assent ends a long running ordeal which has seen both shareholder opposition and increases in the deal price.

Stone Point and the Karfunkel-Zyskind Family originally proposed to acquire the approximately 45 percent of AmTrust’s shares not owned or controlled by their affiliates in January 2018 for $12.25 per share but raised their bid first to $13.50 per share in March before sweetening the offer to $14.75 per share in June following pressure from activist investor Carl Icahn.

During a company special meeting, 79.8 percent of common voting stock backed the deal, while the public shareholders - the aforementioned 45 percent of the shares not connected to CEO Barry Zyskind or his wife Leah Karfunkel’s family - voted 67.4 percent in favour.

AmTrust chairman and CEO Barry Zyskind said he was pleased with the outcome of the vote which he said maximised the value on offer for public shareholders and provided AmTrust with a strong partner in Stone Point.

“Together, as a private company, we will continue to serve our clients, agents, partners and policyholders with a focus on initiatives that will help them achieve success,” he said.

“I would like to thank our approximately 8,000 global employees who, throughout this process, have remained focused on serving our policyholders with best-in-class dedication and service,” he added.

“As our company continues to innovate and drive toward operational excellence, our team members will be AmTrust’s most valuable engine in achieving our long-term objectives.”

Jim Carey, senior principal of Stone Point Capital, added: “Stone Point is excited to partner alongside the Karfunkel-Zyskind family and AmTrust’s management team.

“We look forward to working closely with management to help them drive their current operational initiatives and ultimately capitalize on the longer-term opportunities for the business.”

AIG life & retirement appoints Winslow as international CEO

AIG has named Adam Winslow as CEO, international of its life and retirement division.

Winslow currently serves as CEO of AIG Life Limited (UK), where he has led the business since its acquisition by AIG in 2015.

In his new position, Winslow will continue to lead AIG Life and will now also assume responsibility for Laya Healthcare in Ireland. He will also support potential further international expansion opportunities.

Winslow will also join the life and retirement executive team and will remain based in London. He will continue to report to Rod Rishel, AIG’s life insurance chief executive.

Winslow has more than 15 years of experience in the insurance industry across both life and general insurance in France, South Africa and the UK. Prior to joining AIG, he led both the life retail and partnerships businesses at Aviva.

Kevin Hogan, executive vice president and CEO of life and retirement, commented: “We have established a strong foundation for success and growth in the US, and internationally in the UK and Ireland, which positions us well to expand our existing businesses while pursuing opportunistic growth.

“Adam has successfully integrated and transformed the performance of our life business in the UK, implementing a growth agenda and producing strong shareholder value, all of which are essential skills in helping us deliver on our strategic growth ambitions.”

Winslow remarked: “I am very pleased to join the US life & retirement executive team and take up this new position alongside my existing responsibility as CEO of AIG Life.

“This is an exciting time at AIG, and I look forward to working with colleagues across our businesses to leverage our many strengths and make further progress on improving our performance and delivering profitable growth.”

Managing agent COOs prefer Lloyd's Brussels

Lloyd’s managing agencies are favouring the use of the Corporation’s Brussels subsidiary over the creation of their own EU subsidiary, a survey commissioned by the Lloyd’s Market Association (LMA) has revealed.

The findings come as part of a poll of Lloyd’s market chief operating officers (COOs) to gauge their key priorities for 2018, with 39 of Lloyd’s 55 managing agencies taking part.

The research, which the LMA said provides a comprehensive picture of the concerns, opinions, and priorities of the market’s most senior operations personnel, showed that Brexit is seen as an internal and market-level priority issue for 2018 by a majority of COOs, with 53 percent of preferring the use of the Lloyd’s Brussels hub over the creation of their own EU subsidiary.

Market modernisation was also another key priority for COOs, most significantly the delegated authority transformation initiative, with 93 percent of those surveyed believing that straight-through processing is a viable option for delegated authority relationships.

Furthermore, all respondents said that they are planning underwriting systems upgrades in 2018. Almost 77 percent plan to upgrade coverholder reporting systems and processes.

Tom Payne, market operations director at the LMA said: “It is widely understood that the Lloyd’s market faces an increasingly challenging environment, with COOs having a key role to play in this changing landscape. 

“The LMA Operations Committee (LMAOC) is uniquely placed to represent the operational community in areas where working collectively can drive clarity and value.”

Chair of the LMAOC and head of international operations at Navigators, Sheila Cameron added: “The LMAOC felt that the voice of the COO needed to be more clearly articulated in the context of market modernisation, operational improvement and expense management. This survey, the first of its kind to be commissioned, will help to achieve this. 

“For the first time, the views of Lloyd’s market COOs have been brought together, assessed and collated with the intention of articulating the business and operational challenges faced by managing agents.”