Igor Zax interviewed on Credit Insurance for Secured Lender
InsuranceDay article 26 February 2016
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ISSUE 4,547
FRIDAY 26 FEBRUARY 2016
In depth: Underwriting on the front line
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RSA shares
surge 12% as
full-year profit
soars 43%
Cooper Gay sells US wholesale
business to BB&T for $500m
insurance industry.Visit www.insuranceday.com/mergers-and-acquisitions
The conflict in Yemen marks a fundamental
paradigm shift in modern warfare and, as
an inevitable consequence, changes
the nature of the exposures
faced by underwriters in
the London market
3. NEWS
www.insuranceday.com | Friday 26 February 2016 3
Haley already seeing synergies from
Willis Towers Watson merger
John Haley serves as chief executive of combined firm
Scott Vincent
Editor, news serivces
W
illis Tower Watson
chief executive,
John Haley, said
he expects the
harmonisation of compensation
benefits among legacy Willis and
Towers Watson employees will
be one of the major challenges
as he leads the integration of the
combined firm.
Haley, who led Towers Watson
before the merger, said the over-
lap between the two companies
was less than in the case of the
Towers Perrin and Watson Wyatt
merger of 2010.
“In that merger, we had two
groups that had been competing
for the same clients,” he said.
In contrast, Haley believes a
number of revenue synergies can
be achieved through the Willis
Towers Watson deal, particularly
through the distribution oppor-
tunities offered by Willis’ middle-
market presence.
Speaking at the Economist In-
surance Summit in London yes-
terday, Haley said the two firms’
strategies were already converg-
ing in the run-up to the merger.
Towers Watson had been
looking to extend its business to
include more products and solu-
tions while Willis was moving
from a traditional broking oper-
ation to become much more fo-
cused on analytics, he said.
“One of the earliest synergies
has been combined the analytics
Towers Watson had with the con-
sulting and broking capabilities
Willis had,” he said.
Haley said Willis Towers Watson
is unlikely to pursue any acquisi-
tions in the next year or two as it
continues the process of bringing
the two companies together.
“We think there are big syner-
gies. Towers Watson did not have
a distribution network in the mid-
dle market and the Willis merger
provides this,” he said.
The deal to combine the two
firms was one of a number an-
nounced within the insurance
and reinsurance sector within the
past 18 months.
Research by Willis Towers Wat-
son shows there were 230 deals
in the insurance industry in 2015,
compared with 235 the previous
year. But the value of those deals
has tripled from €40bn ($44.1bn)
in 2014 to €130bn in 2015.
“Our survey has shown 82% ex-
pect to make an acquisition in the
next three years. The single biggest
reason is revenue growth. With or-
ganic growth opportunities slower
compared with before, this is seen
as a path to growth,” he said.
One of the significant trends of
recent MA activity has been the
emergence of major Asian buyers.
“Asia sees western European
countries as a great acquisition as
they have technology which can
be imported back to their home
markets,” he said.
“Asia saw a lot of deals in 2015.
The number of deals with an
Asian target were four times larg-
er in 2015 compared with 2014,
while deals with acquirers from
Asia were five times as large.”
“When we did a survey of the
insurance industry we found 92%
of acquisitions people had done
were in places where they already
had operations. For more than
60%, they were already in the top
10 in that market,” Haley added.
Maloney takes helm
of Cathedral following
management restructure
Lancashire Group chief executive,
Alex Maloney, is to replace Peter
Scales as the head of the group’s
Lloyd’s subsidiary Cathedral Capi-
tal, with effect from April 1, writes
Sophie Roberts.
Maloney will be supported by
Richard Williams, a longstanding
member of the Cathedral senior
management team, who has been
appointed active underwriter.
Subject to Lloyd’s and other ap-
provals, Williams has also been
appointed director of Cathedral
Underwriting, the Lloyd’s manag-
ing agency, and will assume that
role from John Hamblin, who will
leave Cathedral.
Williams will also be appointed
to Lancashire’s underwriting and
underwriting risk committee.
The senior management shake-
up follows the surprise departures
of Peter Scales and John Lynch,
respectively chief executive and
chief financial officer of Cathe-
dral, at the end of last year.
At the time, Lancashire said the
departures of Scales and Lynch
were in line with its continued in-
tegration strategy.
However, sources close to the
situation alluded to a “falling out”
between Lynch and Lancashire
group chief financial officer,
Elaine Whelan.
Additional changes at Cathe-
dral include the appointment of
Simon Fraser, the senior indepen-
dent director on the Lancashire
board, to the board of Cathdral
Underwriting, subject to Lloyd’s
and other approvals.
Lancashire also announced
Lawrence Holder will step down
from the roles of managing direc-
tor and director of Cathedral Un-
derwriting next year.
Lancashire acquired Cathedral
Capital in November 2013.
Maloney said he was excited
at the prospect of working even
more closely with his colleagues
at Cathedral.
ARC aims to become donor-
free within next decade
African Risk Capacity (ARC) has
set itself a target of becoming
“donor-free” between 2020 and
2025 as it scales up its operations,
writes Scott Vincent.
The multi-country catastro-
phe facility, which established
its insurance arm through donor
funding from the UK Department
for International Development
(DIFD) and German development
bank KFW, also has ambitious tar-
gets to reach 150 million Africans
with its products by 2020.
To date, DFID has committed
£100m ($139.5m), with KFW com-
mitting a further €50m ($55m).
Mohamed Beavogui, director-
general of ARC, said the facility
is looking to increase its capital
base to between $1.5bn and $2bn
derived from premiums written
across 30 countries by the end of
the decade.
As the facility scales up, Beav-
ogui said ARC will be looking for
member governments to match
donor investment until eventual-
ly the company will build enough
capital for it no longer to need to
rely on donor investments.
In a presentation at the Econ-
omist Insurance Summit in Lon-
don, Beavogui said ARC is also
working on a model that will be
triggered by frequency of disas-
ters as part of a proposed extreme
climate facility.
ARC was established for the
2014 policy year, with three coun-
tries in the Sahel – Niger, Mauri-
tania and Senegal – all receiving
payouts during its first 12 months.
For the second policy year,
which began on May 1, 2015, sev-
en countries took out policies:
Gambia, Kenya, Malawi, Mali,
Mauritania, Niger and Senegal.
“One of the earliest synergies has
been combined the analytics Towers
Watson had with the consulting and
broking capabilities Willis had”
John Haley
Willis Towers
Watson
5. INSIGHT
www.insuranceday.com | Friday 26 February 20166
Culture vultures
The insurance industry often gets the numbers right in mergers
and acquisitions, but frequently stumbles on cultural obstacles
Pierre Fels and Jenni Hibbert
Heidrick Struggles
I
t is no surprise that insur-
ance companies excel at
understanding the panoply
of risks faced by their cus-
tomers. After all, accounting for
what can, has, or might happen
is a core part of the business. Yet
when it comes to mergers and
acquisitions (MA) many insur-
ance companies only excel at
half the job: assessing the risk of
a potential takeover and expert-
ly crunching the data. The other
half – identifying cultural clashes
that could scuttle integration – is
often neglected.
After a deal closes, and even
during negotiations, insurance
companies must move beyond
the numbers and decide how, or
even whether, to bring the two
cultures together.
Our experience and research
shows many deals in cross-
border MAs in the insurance
sector founder in relation to
cultural issues. Too often, the
industry views cultural differ-
ences as operational matters
that can be hammered out, rath-
er than behavioural differences
that require a more considered
approach. Boards of directors,
which scrutinise the rationale
and costs of a merger, often fail
to consider cultural issues or
monitor post-merger integration.
As the global insurance sector
consolidates and the number of
deals increases, a keener under-
standing of how merging cultures
can (and do) clash will become
more important for success.
To look deeper into the challenge
of cultural integration following
MA, executive search firm Heid-
rick Struggles talked with
senior insurance exec-
utives experienced
in acquisitions in
Asia, Europe, and
North Ameri-
ca. Most agree
clearer commu-
nications and an
active approach to
identifying and ad-
dressing cultural issues
can improve the val-
ue captured from
MA, yet many
admit they over-
look it.
One executive
said at his organi-
sation several trans-
actions were led by
people who never visited
the target company or its market,
and had little local knowledge.
“Having bought assets, we expect-
ed local market leaders who were
new to the group to adopt our cul-
ture off the back of a series of writ-
ten protocols and the occasional
visit to London,” he said. “We sel-
dom asked them about the nuanc-
es of their marketplace.”
Ensuring culture is top of the
agenda will become increas-
ingly important as the industry
continues to rebound from the
2008 economic crisis. A study by
Swiss Re reported 489 MA deals
were completed globally in 2014.
Although the volume remains
well below the pre-crisis peak
(of 674 deals in 2007) the insur-
er concluded that indications
“suggest that momen-
tum behind MA
is building”.
In a separate
study, Deloitte
found the num-
ber of deals in-
volving brokers
grew 40% from
2013 to 2014. Al-
though in Deloitte’s
counting, deals
involving under-
writers edged
lower from 2013
to 2014, the
average val-
ue per deal al-
most tripled, from
$124m in 2013 to
$359m in 2014.
Indeed, 2014 saw the an-
nouncement of eight insur-
ance MA deals with values of
more than $1bn, dwarfing the
volume of big-money deals in
previous years. The largest trans-
action was the $8.8bn takeover
of Friends Life by British insurer
Aviva, creating the largest insur-
er in the UK.
The power of culture
While MA is driven by a range
of underlying strategic objectives,
those with the greatest potential
look beyond pure cost efficiencies.
Success is drawn not just from
spreadsheets, but also from cultur-
al integration that produces better
collaboration and new ideas.
Such cultural integration can
take several forms. The parent
company can absorb and domi-
nate the culture of the acquired
company (perhaps the most com-
mon form); the two cultures can
co-exist, with the acquired com-
pany retaining a certain level of
autonomy; or the two cultures
can intermix, creating a new and
hopefully more ideal corporate
culture. Regardless of the form
that cultural integration takes, the
evidence suggests that insurers
everywhere find it challenging:
for example, 39% of respondents
in a 2016 Towers Watson survey
of 750 global insurance executives
cited “overcoming cultural and
organisational differences” as a
post-integration challenge.
Yet when companies get cul-
ture right, the benefits are sig-
nificant. The 2004 merger of US
insurers Anthem and WellPoint
Health Networks is a clear ex-
ample. Soon after the $16.5bn
merger was approved, Larry
Glasscock, chief executive of the
new company (now called An-
them), made it clear the merger
signaled the birth of a new com-
pany and a new culture, rooted
in internal trust and innovation.
Glasscock first delivered the
message to a newly formed exec-
utive leadership team, comprising
15 leaders from both companies,
then to 300 top managers in the
new company, and finally to its
more than 40,000 employees.
Eventually the new culture would
permeate every aspect of the new
company, from hiring and orien-
tation to performance manage-
ment. By 2007, the company was
named by Forbes magazine as one
of the most admired companies in
the US, had cut administration ex-
penses in terms of share of over-
all revenue and was on track to
reach its growth targets.
Which integration model is best
depends on a variety of factors,
such as the relative size of the two
companies, the optimal organisa-
tional structure after the merger,
and the value created by various
cultural characteristics. But iden-
tifying the right model is a crucial
element of any MA process. By
planning strategies for assimila-
tion with the same fervor as those
for operational efficiencies, in-
surance companies can lower the
risk of failure in MA.
Early start
Spotting and addressing cultur-
al challenges should start well
before the papers are signed.
Parallel to due diligence, acquir-
ing companies should critically
compare attitudes, work habits,
customs, and other less overt
characteristics of the two compa-
nies involved. The effort should
be a routine part of the standard
MA process, rather than an ad
hoc response if friction develops.
One useful tool for comparison
is the corporate-culture profile,
a diagnostic instrument based
on survey data from both com-
panies. Such surveys explore a
range of corporate character-
istics, such as attitudes toward
personal accountability and col-
laboration, trust levels, and in-
tegrity. They also gauge strategic
alignment and commitment and
assess the strengths and weak-
nesses of each culture. A corpo-
rate-culture profile can quickly
identify areas in which two cul-
tures diverge, pinpoint areas
that may require immediate at-
tention, and highlight areas of
common ground that should be
recognised and celebrated.
Our conversations with insur-
ance executives who are experi-
enced in MA highlighted specific
themes that arise during negotia-
tions around geographic location,
management level and mind-set.
These concerns should be includ-
ed in the process to lower the risk
Several factors are contribut-
ing to increased MA activity
in the global insurance sector,
but most consider the main im-
petus to be overall lower pre-
mium rates. Lower rates are
seen as a byproduct of overca-
pacity, and the industry is con-
solidating to retain profitability
and increase differentiation.
Other factors include grow-
ing interest in insurance MA
from a broad range of backers,
including hedge funds, private
equity, and international inves-
tors. Companies are looking for
ways to use vast cash reserves.
A strong US dollar has made
some cross-border deals less
expensive for US companies.
And insurers are recognising
the need for economies of scale,
particularly as the costs of IT
and system changes mount.
In addition, many companies
in Asia are moving into global
markets and looking for strate-
gic acquisitions to drive their
expansion plans. For example,
in 2013 Sompo Japan Insur-
integrating the newest technol-
ogies, like mobile applications
and big data analytics, as a core
component of a company’s busi-
ness model, either to reach cus-
tomers, provide market insights,
or improve internal efficiencies.
Such mergers are especially
prone to cultural clashes as staid
insurers butt against dynamic,
high-tech entrepreneurs, often
extinguishing the very spark
that created value in the ac-
quired company.
And finally, in a reflection of
the industry’s positive outlook,
outside investors are also turn-
ing to the sector as a channel for
steady yields. In one example, in
2014 the Canadian Pension Plan
Investment Board acquired the
US-based Wilton Re for $1.8bn. n
Doing a deal
of cultural clash in an acquisition.
In general, workers at an ac-
quired company understand –
and sometimes fear – that job cuts
are possible. Painting too rosy a
picture ahead of a deal could cre-
ate tensions later when reality
hits. “Be honest from the outset,”
suggested a senior manager at a
European insurer. “You’re buying
a business for their book, and you
need to cut costs.”
Honest communication during
negotiations and due diligence
can help expose attitudes toward
potential job cuts and identify any
measures that are seen as off lim-
its. When a global company negoti-
ated a takeover of a Malaysian life
insurer, the acquirer presented a
clear plan for adjusting leadership
roles, pointing out gaps and ex-
plaining how they would be filled,
said an executive close to the deal.
The plan was presented at meet-
ings to ensure alignment. “The
acquirer needs to understand and
respect non-negotiables relating
to culture and not just look at the
numbers,” this executive said.
Open communications at this
stage can also create a clear pic-
ture of how integration will be
handled if the takeover is complet-
ed. For example, acquiring compa-
nies often promise a short period
with no major changes immediate-
ly following an acquisition. This
interval allows senior executives
and staff at both companies to be-
come better acquainted and can
help produce a more appropriate
integration plan for capturing the
full value of the merger.
Creating a collaborative atmo-
sphere – one that does not alienate
staff at the company being ac-
quired – begins with first impres-
sions. Companies that tout their
superiority or power can find cul-
tural integration more difficult. In
one case, the due-diligence team
from a US acquirer flew into Asia
on private jets, stayed at the best
hotels and boasted of their life-
style to staff at the target compa-
ny, creating emotional distance
between them.
“Historically the insurance buy-
ers have an absorb-and-impose
approach to culture,” a top execu-
tive at a Japanese insurer said. “US
companies are known to be the
worst acquirers. They generally
look at immediate financial results
and key performance indicators
rather than the long-term picture.
Buyers will tend to focus on pro-
tecting their core headquarters’
market first and other regions are
at the bottom of the list.”
Throughout the acquisition
process, staff at the targeted com-
pany should be treated as any
other corporate colleague. Cor-
porate hierarchies and chains
of command exist, of course, but
when they are the defining as-
pect of personal relationships,
staff at acquired companies can
become more anxious and less
collaborative, posing an obsta-
cle to integration. One executive
observed, “Nothing raises hack-
les more than feeling you have
been absorbed into a large and
seemingly uncaring behemoth
when, up until a few weeks ear-
lier, you were top of the tree in
your local market.”
Execution
If efforts before the deal can be
seen as cultural intelligence-gath-
ering, those after the deal fo-
cus on execution. After all, each
integration effort is unique in
its cultural aspects. A company
may have a standard approach
for combining product service
lines, for example, but bringing
staff members with diverse back-
grounds together effectively re-
quires a tailored approach.
For years, French insurer Axa
followed a generally successful
pattern that it rigorously applied
to its MA activities. Conversion
in some areas, such as branding,
corporate values, shared services,
and IT infrastructure, were not
up for negotiation, but acquired
companies were allowed greater
flexibility in others, according to
a former country leader for Axa.
But even Axa’s template is be-
ing tested by today’s volatile and
highly competitive market.
Our experience and discussions
with insurance executives show
that there are several points that
are helpful to keep in mind during
this phase of a takeover.
In many takeovers, cutting costs
(and jobs) at the acquired compa-
ny is one of the first priorities. But
moving too fast can cause unnec-
essary friction and inadvertently
force valuable talent out the door.
By taking a long-term view of
the value potential of an acquisi-
tion, companies can take the time
needed to understand cultural dif-
ferences, and then focus only on
those that may directly prevent
the company from reaching its
goals. As two businesses merge, it
is natural for workers to become
protective of their positions, and
even paranoid about their future.
The acquiring company must take
pains to demonstrate any cuts to
duplicated roles will be decided
based on merit, rather than inter-
nal connections.
Some insurers can be very de-
liberate with any changes they
make to an acquired compa-
ny over a long period of time.
Some companies can spend the
first three or four months after
an acquisition getting to know
how the new company works,
using measures to help pinpoint
where a company’s legacy cul-
ture might interfere with busi-
ness objections. For example, if
lower-level managers say they
simply follow their boss’ orders,
there could be a misalignment
on staff empowerment that
could reduce innovation and
block flows of information.
Once a decision is made to cut
staff or to take another signif-
icant step, the acquiring com-
pany should act quickly and
completely. Drawing out painful
measures only accentuates lin-
gering staff anxieties and delays
the return to normalcy.
The importance of clear and
honest communications contin-
ues into the integration phase,
and indeed beyond it as a matter
of course. New structures or other
big changes should be broadcast
quickly and widely to prevent
destabilising rumors from tak-
ing hold. Any messages about
upcoming changes should be
non-ambiguous and professional,
especially for measures that could
be perceived as negative. There is
no good time for bad news, yet un-
certainty is often more corrosive
than the reality.
The global insurance sector
appears ripe for a new wave of
consolidation as companies in-
vestigate entry into new markets
and access to new technologies.
As they pore over the numbers
and explore the strategic ra-
tionale behind various moves,
would-be dealmakers should also
take stock of culture.
Industry leaders have long
been excellent at weighing the
financial risks and rewards of
an acquisition, but they often fall
short when considering the cul-
tural aspects – if they consider
culture at all. Cultural differenc-
es, however, can often ruin an
otherwise well-planned acqui-
sition. By purposely including
culture into the process during
negotiations and after the deal is
signed, companies can improve
their odds of success. n
Pierre Fel is a principal at
executive search firm Heidrick
Struggles’ Singapore office and
a member of the global financial
services practice. Jenni Hibbert
is a partner in the London office;
she leads the UK financial
services practice
ance bought UK-based Canopius
Group, and in 2015 Mitsui Sum-
itomo Insurance (MSIG) bought
Amlin. And among the recent
deals originating from China,
Fosun International bought
Bermuda-based Ironshore in
2015, and in 2016 China Min-
sheng Investment was finalising
its acquisition of UK-based Sirius
from White Mountains.
Against this background, insur-
ance companies are pushed to-
ward MA for a variety of reasons.
The most common, still, is to bring
together two companies with com-
plementary businesses and strat-
egies and capture greater value
through scale efficiencies.
Other strategic goals are also
driving deals, for example, at-
tempts to harness digital tech-
nology and reinvigorate tired
corporate business models. In
one case, US insurer Aetna in
2014 bought technology provider
bswift, which offers cloud-based
insurance exchanges and other
digital products, for $400m.
These types of deals focus on
Integrating
different
cultures after
a merger
between
companies
is crucial to
success
489
MA deals
completed globally
in 2014, according
to Swiss Re
$359m
Average value per
underwriter deal
in 2014, according
to Deloitte
39%Percentage of respondents
in Towers Watson survey
of 750 executives who said
‘overcoming cultural and
organisational differences’
was a major post-
integration challenge
Mitsui Sumitomo:
Japanese company
bought Amlin last year
www.insuranceday.com | Friday 26 February 2016 7
6. RSA shares surge 12% as
full-year profit soars 43%
Chief executive Stephen Hester hails growing value and prospects as
turnaround reaches completion
Michael Faulkner
Editor
R
SA group chief exec-
utive, Stephen Hes-
ter, said the insurer is
“more valuable” now it
was than six months ago when
Zurich made an abortive bid to
buy the business.
Speaking yesterday as the
insurer unveiled group operat-
ing profit was up 43% to £523m
($728.4m) for 2015, Hester said
RSA is now in a position to “pros-
per independently”.
Shares in RSA soared 12% in
yesterday morning’s trading.
He said the turnaround phase
of the group’s action plan com-
menced in 2014 was “largely
complete” and there were “good
prospects of substantial further
performance improvement”.
Hester said RSA had received no
further approaches from prospec-
tive buyers after Zurich dropped
its 550p per share offer last year.
But he could not rule out further
approaches being made.
“The company is stronger than
it was when talking to Zurich –
and more valuable,” he said. “We
believe strongly RSA can prosper
independently, indefinitely into
the future; and we can exceed this
[550p per share] valuation on a
standalone basis.
“With our strategic restruc-
turing largely complete, RSA is a
strong and focused international
insurer,” he said.
RSA announced yesterday that
it is accelerating its cost-saving
programme, increasing its annual
gross cost savings target to more
than £350m by 2018.
It also increased its underlying
return on tangible equity expecta-
tion to the upper half of its 12% to
15% target range by 2017.
The group reported strong
underlying results across Scan-
dinavia and the UK and record
underwriting profit in Canada.
The UK business booked a
£12m underwriting result de-
spite the £76m losses from De-
cember’s storms.
The troubled Ireland business
made an operating loss of £26m,
much reduced from the 2014 loss
of £97m loss. RSA said it expected
to reach operating profit in 2016.
Group underwriting prof-
it rose to £220m from £41m in
2014, with a 2.8 percentage point
improvement in the combined
ratio to 96%.
Overall group net written pre-
miums were down 3% to £6.8bn,
driven mainly by the group’s dis-
posal programme.
For the 2015 accident year,
underwriting profit rose to a
record £129m, compared with
£73m in 2014.
Hester said the group’s strate-
gic restructuring will complete in
2016 as the remaining contracted
disposals close.
During 2015 disposals in Hong
Kong, Singapore, China, India,
Italy and UK engineering were
completed. The disposal of it op-
erations in Russia completed af-
ter year-end. The £403m sale of
RSA’s Latin American operations
is scheduled to complete in stages
over the next six months.
Total agreed disposal proceeds
to date now stand at £1.2bn.
“We see 2016 as the last ma-
jor restructuring year with dis
posals and balance sheet work
completing and the heavy lifting
of core business improvement
and cost reduction action con-
tinuing,” Hester said.
RSA reports Solvency II
capital ratio of 143%
RSA has become the latest insur-
er to disclose its capital ratio un-
der Solvency II, reporting a ratio
of 143% at year-end 2015, writes
Michael Faulkner.
The insurer said the sale of its
Latin American unit, which will
close this year, would increase
the coverage ratio to 155% pro
forma. RSA said it was targeting
a ratio of 130% to 160%.
Other European insurers
have been disclosing their Sol-
vency II ratios as they report
year-end results.
French insurance giant Axa,
which had reported a Solvency
II ratio ahead of the regime go-
ing live, said yesterday its year-
end 2015 ratio was 205%, up four
points from the end of 2014.
Last week, Allianz said its Sol-
vency II ratio rose to 200% at the
end of 2015, compared to 191% a
year earlier. It attributed the rise
to “active risk management”.
In January, Prudential became
the first UK insurer to report its
capital ratio under the new Sol-
vency II rules, which came into
effect on January 1, 2016.
Prudential said its estimated
group Solvency II surplus at June
30, 2015 was £9.2bn ($13.06bn)
under its internal model, before
allowing for the 2015 interim
dividend, with a solvency ratio
of 190%.
Experts have said investors
should expect Solvency II ratios to
be lower than under the previous
solvency rules.
Jim Bichard, UK Solvency II
leader at PwC, said the majority
of insurers would report ratios of
between 100% and 200%. “The
market will have to get used to
150% to 200%, and some are go-
ing to be 130% to 140%,” he said.
Solvency II requires insurers
to calculate their capital require-
ments based in their underwrit-
ing, investment and operational
risks. A Solvency II capital ratio
of 100% or more shows the insur-
er has sufficient capital to cover
these risks.
While Solvency II is similar to
some previous European solven-
cy regimes, such as in the UK, it
has some major differences, such
as the addition of a risk margin
and the inclusion of certain ad-
justments to dampen the effects
of market volatility, which can
lead to different capital ratios.
Marketform
exits general
liability
business
Specialist Lloyd’s underwriter
Marketform said yesterday it will
cease to write general liability
business, writes Michael Faulkner.
The decision forms part of a
broader strategic review of the
business by new chief executive,
Martin Reith.
Marketform said general li-
ability business did not fit
with the group’s longer-term
strategic vision.
The carrier said it would con-
tinue to operate a full claims
service for existing clients and
will retain two dedicated under-
writing professionals, with both
a box and office presence. This
will be administered under the
leadership of Ian West, head of
financial and professional lines.
Industry veteran Reith was
parachuted into the top job at
Marketform, which is owned
by Great American Insurance
Group, at the end of last year,
with the task of improving the
carrier’s profitability.
Reith said: “We did not take the
decision to exit general liability
lightly; however, as part of the on-
going strategic review of the busi-
ness, we concluded this line no
longer fits our longer-term plan
for Marketform.
“Importantly, we will maintain
our commitment and service ex-
cellence to clients with existing
policies while more broadly we
are excited about the opportuni-
ties for growth we see across oth-
er lines,” he added.
“We did not take
the decision
to exit general
liability lightly;
however, as part
of the ongoing
strategic review of
the business, we
concluded this line
no longer fits our
longer-term plan
for Marketform”
Martin Reith
Marketform
Stephen Hester,
RSA chief
executive: said
the company is
‘more valuable’
now than when
it was talking
to Zurich six
months ago
and is ‘a strong
and focused
international
insurer’
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NEWS
www.insuranceday.com | Friday 26 February 20162
Cooper Gay sells US
wholesale business
to BBT for $500m
Deal includes US specialty managing general agencies and US
reinsurance brokerage business
Scott Vincent
Editor, news services
C
ooper Gay Swett Crawford
(CGSC) has agreed the sale of
its US wholesale broking oper-
ations to BBT Corporation for
$500m in cash.
The deal for the Swett Crawford
component of the business includes its
US specialty managing general agencies
(MGAs), including JH Blades Co, and
US reinsurance brokerage business.
The specialty MGA Creechurch Inter-
national Underwriters, which operates
in Canada, is not included in the sale.
US financial services giant BBT said
the transaction is expected to add more
than $200m in annual revenue to its in-
surance arm, BBT Insurance.
CGSC announced in November it was
looking to spin of its US business follow-
ing a review of the business by former
Willis executive Steve Hearn after he
replaced Toby Esser as chief executive.
Hearn said the proceeds of the sale
will “provide us with the resources to
transform our business”.
The group has come under some
pressure from rating agencies, which
have expressed concerns about its ini-
tiatives to improve revenue growth
and profitability.
Standard Poor’s (SP) downgrad-
ed the company to a B- from B in 2014.
It has placed the company on Credit-
Watch with developing implications
since the plans to sell the US business
were announced.
CGSC was created by the merger in
July 2010 of Cooper Gay, headquar-
tered in London, and US broker Swett
Crawford.
Rating agencies will now be examin-
ing closely how the sale affects CGSC’s
credit profile.
Hearn said: “The impact of [yester-
day’s] announcement on the group will
be profound and we can now begin the
next phase of our company’s develop-
ment. We have the tools at our disposal
for growth and a strategy that will set
us apart.”
BBT is one of the largest finan-
cial services groups in the US. It is the
fifth-largest insurance broker in the US
and the sixth largest internationally,
with revenues of $1.7bn in 2014.
“Swett Crawford nicely enhances
our insurance business and increases
and diversifies our overall fee income
profile,” Kelly King, BBT’s chairman
and chief executive, said.
John Howard, chairman and chief
executive of BBT Insurance, added:
“This represents a compelling oppor-
tunity to further build BBT Insurance
with the addition of a world-class com-
pany with a strong and talented team
of industry specialists.”
At present, BBT’s wholesale insur-
ance operations include property and
casualty broker and managing general
agent CRC Insurance Services, Crump
Life Insurance Services and managing
general underwriter AmRisc.
The deal is subject to regulatory ap-
provals and is expected to close in the
first half of 2016.
Last month it emerged BBT had
withdrawn its proposal to acquire a
stake in London-based wholesale bro-
ker Miller.
BBT said it was no longer pursuing
the transaction because of “unanticipat-
ed regulatory hurdles in the US related
to the investment”.
“The impact of [yesterday’s]
announcement on the group will be
profound and we can now begin the next
phase of our company’s development”
Steve Hearn
Cooper Gay Swett Crawford](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)