End of The Line For Insurance Mergers & Acquisitions?

There is conflicting evidence as to whether the UK Insurance M&A Market is contracting.
Certainly it looks like some of the much bigger UK Insurance boys are up for sale! We sent our Insurance Newshound Kris Oldland out to find out who is up for grabs; and just what is going on in the UK Insurance Mergers And Acquisitions Markets?

UK Insurance Mergers and Acquisitions: Rumours round up!

First up is Insurer Provident, who are looking good for acquisition after having had their long-term counter-party credit and insurer financial strength ratings upped from stable to positive and affirmed at BB+ by ratings agency Standard & Poor.

An S & P spokesman commented that the revision was “based on the possibility that there will no longer be any parental constraint on the ratings on Provident Insurance following its sale, thereby allowing the company’s ratings to move by up to two notches to that of its stand-alone credit profile.”

Provident’s current parent GMAC has suffered a weak credit quality which has impacted upon the insurers rating.

However with the company effectively up for sale the parental constraints are less likely. S&P’s credit analyst Nigel Bond commented “The outlook also continues to reflect our understanding that the company’s financial strength will be protected to a significant extent by its supervisor, the UK Financial Services Authority.”

Bond also added “If the sale does not occur, or the financial strength is not adequately protected, it could lead to a negative rating action.”

Meanwhile the Kwik Fit Financial Services (KFFS) is looking to be sold for the fourth time in just over a decade.

French private equity firm PAI Partners have put a £200m price mark on the company after contracting Credit Suisse to perform a strategic review of their current business operations. However, it would seem that they won’t have to look too hard to find a suitable buyer with insurers, brokers and rival private equity firms all being rumoured to be voicing an interest in the private lines motor insurer.

Managing Director of KFFS Brendan Devine commented “KFFS is now a major financial services organisation; it is getting fart to big to be part of what is a tyre and exhaust company”

The insurance company recorded an £82.7m brokerage in 2008 ranking it as the 15th largest broker according to IMAS and also includes Green Insurance Company and motorbike specialist Express.

Getting back into the acquisition trail are Kerry London who are in good shape after rather smartly side stepping the difficulties suffered in the construction sector and diversifying to maintain a healthy cross sector portfolio.

Following on from the launch of an MGA with Fortis in May last year in the sports and leisure field (which is currently operating 20% above predicted revenues) Kerry London have posted impressive figures for the last year with annual turnover up to £15.9m in 2009 and a bank debt being reduce to £5.75m from £9.3m.

Despite an embarrassing “oversight” which led to a winding up order being served due to a failure to register full year accounts for 2008, the company are bullish about being in a good position to get back on the hunt for new acquisition and have confirmed that they have brought in a specialist adviser to work on their acquisition strategies.

Household brand E-Sure has also been snapped up recently by E-Sure founder Peter Wood backed by Private Equity firm Tosca Penta Investments and Electra Partners.

Mr. Wood founded the company in 2000 with the support of Halifax which has since become firstly part of the Bank of Scotland group and subsequently became part nationalised as a direct result of the recession. He has now taken a 70% stake in the company once more.

Taking an immediate step away from HBoS any existing policies underwritten by E-Sure will now be passed back to Halifax on renewal.

A spokesman said “As we are now independent it does not make sense for us to underwrite a Halifax named brand.” However, the existing deal between E-Sure and Sainsbury’s is likely to remain in tact despite originally being a joint venture between Halifax and the Supermarket giant.

“Everything is the same except one major shareholder has been replaced” the spokesman added regarding the Sainsbury’s deal. “The Sainsbury’s contract is still at E-Sure”

Finally, Lloyds broker RFIB’s new chief exec Marshall King has also indicated that he expects them to become acquisitive in the near future, although he is shying away from the seemingly mandatory desire to float on the London Stock Exchange just yet.

After a successful Private Equity backed MBO just under three years ago RFIB have had a phenomenal success posting a 73.52% annual profit growth to £6.06m last year. Now it appears that King wants to move them into the next tier. “Will we consider acquisitions in the future? Yes we will. When you get to a certain size then it makes sense to take slightly bigger bites if there is a good fit.” He said adding that he would be “surprised if we do not make one or two [acquisitions] in that time”

With Pricewaterhouse Coopers currently reporting M&A levels have dropped throughout the financial crisis by a staggering £30bn/year since the halcyon days of 2007, one could be forgiven for taking this brief flurry as an indication that we are starting to get back on track.

And with the onset of Solvency II possibly providing a catalyst for a further rise in M&A activity in the industry, as capital providers from a wider range are enticed into a well structured and regulated industry, then maybe, just maybe we may be getting ourselves back on track?

Hmm, Intersting stuff Kris! Insurance blogger then phoned up Insurance Mergers And Aquisitions specialist Anne Moran of Insuretec, who confirmed our suspicions about the UK Insurance Brokers Market.

She told Insurance Blog,

“We are seeing much more activity on the buying front, from Insurance Companies who are seeking to purchase insurance brokerages and accounts, offering both exits and continual active roles, making the offers available both more flexible and attractive to the seller.”

“Insurance companies are looking to build and strengthen the brokers they are purchasing.”
Sellers have many options available to them now. Our introduction service is free to all sellers and we help make the options available to them.”

“Brokers are still active purchasers, looking for varying areas of insurance portfolios and brokerages.”
“Wholesale and underwriting agencies are back in demand.”
” We always have a demand for property owners, quality commercial large or small, household and motor( especially specialist)throughout the UK so if you are considering selling or looking at other options please talk to us first at http://www.insurancebrokersellers.com

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