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EC News (1st November 2018)

November 01, 2018

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

RenRe acquires Tokio Millennium Re for $1.5bn

Bermudian reinsurer RenaissanceRe has struck a $1.5bn cash and paper deal to acquire Tokio Millennium Re (TMR).

The transaction - which will see RenRe acquire Tokio Marine’s reinsurance platform, including Tokio Millennium Re AG and Tokio Millennium Re (UK) Limited – values the business at 1.02x tangible book value at the date of closing.

If closing tangible book value is unchanged from 30 June 2018, this would result in a total consideration of c.$1.5bn, consisting of around $1.22bn of cash and $250mn of RenaissanceRe common shares, with the cash portion part funded by a potential $250mn pre-closing dividend from TMR.

The deal has been unanimously approved by the boards of directors of both companies.

The announcement comes after RenRe faced recent pressure from an activist investor to commence a strategic review of the company, including the consideration of a potential sale.

According to an investor presentation, the acquisition is expected to boost RenRe’s gross written premiums from $3.2bn to around $3.9bn on a pro-forma twelve-month trailing basis.

In connection with the transaction, Tokio Marine has agreed to provide RenRe a $500mn adverse development cover that will protect TMR’s stated reserves at closing, including unearned premium reserves. 

In addition, Tokio Marine and RenRe will enter a business cooperation agreement, which will enhance their business relationship and facilitate cooperation on a portion of the international reinsurance purchases of Tokio Marine and its affiliates.

It was also announced that US insurer State Farm has agreed to invest $250mn in the Bermudian reinsurer through its purchase of RenRe’s common shares in a private placement, after which State Farm will own about 4.8 percent of RenRe’s common shares.

RenRe president and CEO Kevin O’Donnell commented: “We are very pleased to have entered into a definitive agreement to acquire Tokio Millennium Re from Tokio Marine. This transaction will increase our scale, broaden our reach and extend our ability to apply our core strengths to a deeper customer base. 

“Our unique ability to capitalize on large, one-of-a-kind opportunities underscores our global reinsurance leadership, including in casualty and specialty lines, and our ability to execute on our successful, highly differentiated strategy.”

State Farm executive vice president, Paul Smith, added: “We see this as an opportunity to strengthen the long-term relationship we have with RenaissanceRe.”

RenRe said that is expects the deal to be immediately accretive to book value per share, tangible book value per share, operating earnings per share and operating return on equity upon closing, with “material synergies” within the first two years.

The transaction is slated to close in the first half of 2019, subject to customary closing conditions and regulatory approvals.

Ed to be acquired by BGC Partners

BGC Partners has agreed to acquire global wholesale and specialty broker Ed.

Under the terms of the agreement, a subsidiary of BGC will acquire 100 percent of Ed, which includes broking operations under the Ed brand in UK, Singapore, Hong Kong, Dubai, Miami and China; Ed's German marine broking arm Junge & Co. Versicherungsmakler GmbH; Ed's managing general agent (MGA) operations Globe Underwriting Limited based in the UK; and Cooper Gay (France) SAS, which is based in Paris.

The financial terms of the deal were not disclosed.

The deal expands BGC's insurance division, which was established in 2017 when the global brokerage and financial technology company acquired Lloyd’s broker Besso.  

In a statement, BGC said that Ed expects to report revenues of around $100mn in 2018. 

With the addition of Ed 's brokers and back office personnel, Ed and Besso combined are expected to place approximately $2bn of premium in 2018 and have approximately 300 combined brokers operating across 10 countries.  

Ed group CEO Steve Hearn said: “To be able to announce the agreement with BGC is tremendously satisfying, given their ambition and appetite for growth. We feel that the best fit and the strongest future for us is with BGC, one of the leading brokerage firms in the world. With them, we are poised to make the next leap forward to redefine insurance broking.”

Shaun Lynn, president of BGC Partners, commented: "We are delighted to reach an agreement to purchase Ed, a leading independent Lloyd's of London broker with a global footprint.  

“It will be an important acquisition with respect to our strategy of building the insurance brokerage division within the company". 

AIG appoints Talbot’s Bilsby as global head of specialty

AIG has named Talbot CEO Peter Bilsby as its global head of specialty.

In his new role, Bilsby will be responsible for the global energy, marine, aviation and credit lines businesses. He will report to Christopher Townsend, CEO of AIG General Insurance International.

Bilsby has served as CEO of Lloyd’s (re)insurer Talbot since 2016, which AIG acquired in July 2018 as part of its $5.6bn acquisition of Validus. AIG said that he will continue in this role until his successor is appointed.

Prior to taking the helm of Talbot, Bilsby served as managing director of the carrier and director of underwriting. He joined Talbot in September 2009 as head of global aerospace from XL London Market Ltd. Before XL, he held the position of managing director of the aviation division of Markel International.

Commenting on the appointment, Townsend said: “I’m pleased to appoint Peter to lead our Global Specialty businesses. Our clients and partners will benefit from Peter’s deep understanding of this sector and his leadership track record at Talbot.”

Bilsby remarked: “I am very much looking forward to working with the team to build a market-leading global speciality business. It has been a privilege to serve as CEO of Talbot and to work alongside such talented colleagues.”

Canopius names Winch as A&H head

Canopius has strengthened its accident & health (A&H) team with the appointment of Alan Winch as head of the division.

Winch joins Canopius from Tokio Marine Kiln (TMK), where he latterly served as department head of A&H, having joined Kiln in 2005.

He will be joined by former colleague Tim Prifti in December 2019, who resigned from TMK in June following a “reshaping” of its A&H division.

They will also be joined by Henry Brigstocke in October 2018 and Lewis Kateley in January 2019.

Canopius said the four hires build on its existing portfolio written by Mike Dickson and Dominic Ryeland, adding that it plans to meaningfully increase its offering, including excess of loss reinsurance.

The expanded A&H business, which forms part of the Lloyd’s carrier’s specialty practice, will report to head of specialty Bernie de Haldevang.

De Haldevang commented: “We are truly delighted to welcome Alan and the new members of the team. Success results from the quality of people we are able to offer our brokers, irrespective of market conditions or the march of technology. Alan and the team are an investment in this pursuit.”

BP Marsh increases Nexus stake

BP Marsh has upped its stake in Nexus by 1.9 percent as it revealed that the specialty managing general agency (MGA) has ended its previously announced ownership review.

In a stock exchange announcement on 30 October, the private equity investor said that it paid a £2.5mn cash consideration for the stake, which it said is in line with its valuation of Nexus as of 31 July 2018. 

BP Marsh said it had purchased the shares from a non-executive director of Nexus - Hugh Morland. This brings its aggregate shareholding in Nexus to 18.5 percent.

Earlier this year, Nexus revealed that it was considering options for a “potential liquidity event” in 2018.

However, BP Marsh noted that “this has been duly explored, with the board of Nexus reaffirming its existing growth strategy in line with its continuing shareholder base.”

“The outcome of this strategic review has the full support of BP Marsh, which is emphasised by this additional share purchase,” it said in the stock exchange announcement.

Nexus recently announced the acquisitions of Asian structured solutions specialist Huntington Underwriting Limited on 6 September 2018 and Altitude Risk Partners, a London-based aviation MGA, on 7 September 2018.

Following these transactions, Nexus estimates that for the year ending 31 December 2018, the business will underwrite premium income of $350mn across 15 specialised classes of business and deliver income of approximately £41mn and EBITDA of approximately £15mn.

Daniel Topping, BP Marsh's chief investment officer and the company's nominee director on the board of Nexus commented: "We are pleased to increase our shareholding in Nexus, as it continues on its exciting growth trajectory. I see this as a vote of confidence in Nexus' existing strategy."

AmTrust at Lloyd’s adds Forcey to NA property cat team

AmTrust at Lloyd’s (ATL) has expanded into North American property cat business, hiring Lucy Forcey as a senior underwriter within the team.

Forcey joins from Axis, where she most recently served as a class underwriter for the North American catastrophe reinsurance team. She began her career in 2006 as an assistant internal auditor at Novae Group, before moving to North American binders team where she was a trainee underwriter and then joining the North American catastrophe reinsurance team in 2011.

The team, which represents a new line of business for ATL Syndicate 1861, will be led by Greg Roberts who is set to join the carrier by end of the year along with additional team members.

Chris Jarvis, director of underwriting at ATL said: “Lucy is a great addition to the team and brings much experience and expertise to the role.”

“By adding this line of business to our portfolio we’ve expanded the scope of products we can offer our customers. Syndicate 1861’s 2019 business plan was approved this week including the addition of this market leading team. Their arrival is a key aspect in moving the Syndicate’s balance of business towards a more even split between direct and reinsurance lines,” he continued.

Jarvis added that this was the “perfect ‘greenfield’ platform.”

“Because there are no legacy issues to consider, we can create a new book with a great pricing structure based on enhanced decision-making. Our new team will be able to offer extremely quick turnaround on quotes, which benefits our customers and places us ‘ahead of the pack’”.

Forcey said: “I’m delighted to be joining AmTrust and excited to be part of the team launching this new class of business for Syndicate 1861. We see good opportunities to use best in class analytics to differentiate ourselves within this profitable line.”

Lloyd’s Brussels to write fac and non-proportional XoL treaty reinsurance from 1.1

Lloyd’s has announced that it will write facultative reinsurance and non-proportional excess of loss treaty reinsurance on Lloyd’s Brussels paper from 1 January 2019 across all markets in the EEA.

The Corporation also revealed that in the unlikely event that the UK does not secure Solvency II reinsurance equivalence in 2019, it will be ready to process the remaining treaty reinsurance business through Lloyd’s Brussels from 1 January 2020.

Lloyd’s chief commercial officer and Lloyd’s Brussels CEO Vincent Vandendael said: “We expect that, following Brexit, the UK will apply for and receive Solvency II reinsurance equivalence. However, we are working to ensure that our reinsurance customers can continue to access the market’s specialist policies in the event that the UK leaves the EU without a transitional agreement or equivalence.”

Lloyd’s said the market can continue to write reinsurance in the EEA states until 29 March 2019 – the date of the UK’s exit from the EU - with the confidence that all valid claims will be paid. After this date, if transitional arrangements or equivalence are in place, the market can continue to do business via syndicate paper as they do today, it added.

However, even without transitional arrangements or equivalence, Lloyd’s Brussels will be able to write facultative reinsurance and non-proportional excess of loss treaty reinsurance from 1 January 2019 across all markets in the EEA. The remainder of the treaty reinsurance business can be written as cross-border business on syndicate paper from EEA States under World Trade Organisation (WTO) terms, with the exception of Germany and Poland.

The Corporation added that in the unlikely event that the UK doesn’t secure equivalence in 2019, it will be ready to process the remaining treaty reinsurance business through Lloyd’s Brussels from 1 January 2020.

In addition, Lloyd’s said that it is investigating a bespoke solution for Lloyd’s Brussels to process proportional treaty reinsurance business in 2019 which could also apply to non-proportional treaty. 

Vandendael added: “Along with other London market partners, we continue to strongly make the case that an EU equivalence decision with respect to the UK’s reinsurance framework should be secured as soon as possible and by no later than the end of the transition period. It is clear from the UK Government White Paper that the UK Government aims to achieve Solvency II equivalence of UK reinsurance regime.

“We will know before 29 March 2019 whether we have transitional arrangements. This, alongside the solutions we are working on, the market’s strong customer relationships and the commitment to pay all valid claims, will all help us maintain and grow our business partnerships across the EEA.”

Breitburd named Axa UK & Ireland CFO

Axa has appointed Amelie Breitburd as chief financial officer (CFO) of Axa UK and Ireland.

Breitburd, who has been at Axa for the past 14 years, begins her new role on 1 January 2019. She was most recently CFO of Axa Asia and has held several senior roles at Axa Group in Paris, as well as serving positions at KPMG and Allianz.

She replaces outgoing Bertrand Poupart-Lafarge, who is taking up the role of CFO at Axa France. He joined Axa UK and Ireland in September 2012 after working for Axa US as chief investment officer and treasurer and CFO of Axa Canada. Poupart-Lafarge joined Axa in 2003 as CIO of Axa France.

As part of her new role, Breitburd also becomes the new executive sponsor for Axa UK and Ireland’s diversity and inclusion programme, a post previously held by Poupart-Lafarge for almost four years.

Axa UK & Ireland chief executive Claudio Gienal commented: “I am delighted that Amelie Breitburd is joining Axa UK and Ireland as our new CFO. Amelie has played an important role in the success of Axa Group in Paris and brings significant skill and experience to our management team.

“I would also like to thank Bertrand for his excellent work as both CFO and executive sponsor for diversity and inclusion. Everyone at Axa UK and Ireland wishes him the best of luck as he starts a new and exciting chapter as CFO of Axa France.”