B.P. Marsh & Partners Plc the niche venture capital provider to early stage financial services businesses, is pleased to note that its investee company Nexus Underwriting Management Limited (“Nexus”), in which it holds an 18.6% shareholding, has announced that it has completed the acquisition of Zon Re Accident Reinsurance (“Zon Re”), a U.S. based Reinsurance Underwriting Agency. In 2016 Zon Re produced a Gross Written Premium of $14.3m, revenue of $3.77m and EBITDA of $2.69m. This acquisition was funded via a proportion of the previously announced £30m loan facility provided by the Company and HPS Capital Partners.
Zon Re has partnered with the largest and most respected insurance companies in the U.S., being Zurich, Liberty Mutual and Federal Insurance Company (Chubb & Son). Zon Re currently oversees a portfolio of approximately $15m in Gross Written Premium and has an average historical combined ratio of 68% delivering over $77m in underwriting profit to risk partners over the past 12 years.
Zon Re is a management owned Reinsurance Underwriting Manager founded in 2003 and is run by Kieron Farrelly (Executive Vice President and Chief Underwriter), Chris Holland (Vice President and Senior Underwriter) and Vern Ismen (Senior Vice President and Compliance, Claims and Contracts).
Zon Re offers domestic and international reinsurance capacity in the accident reinsurance space, specifically for primary life, property & casualty and accident & health. This acquisition, based in New Jersey, is Nexus’s first in the U.S., and adds Treaty Reinsurance as a new class within Nexus’ business offering.
Nexus underwrites a number of specialty products on behalf of underwriting partners that support its product offerings within the following lines of business: financial lines, trade credit, accident & health, surety, travel, property, latent defect, marine and cyber. This is the third and final of three currently planned acquisitions from Nexus, the first two being the marine cargo specialist Vectura Underwriting and the trade credit specialist Equinox Global, as has been reported by the Company over the past couple of weeks.
These acquisitions will increase Nexus’s financial forecasts for 2017 as follows: Gross Written Premium will increase to a forecast of £160m, commission income to a forecast of £30m and EBITDA to a forecast in excess of £11m.
By way of background, since the Company’s investment in 2014, Nexus has grown its Gross Written Premium income from £56m in 2014 (2017F: £160m), a forecast increase of 185%. In the same period, commission income has increased from £12.3m(2017F; £30m), a forecast increase of 143%, and EBITDA has increased from £2.6m (2017F: £11m), a forecast increase of 323%.
Nexus’s Chairman Colin Thompson stated; “Following on from the successful conclusion of Nexus’s capital raising process last week, Zon Re fits the model of profitable, proven, niche MGAs, that we plan to target with our “buy and build” strategy, which will deliver significant EBITDA and value to the Nexus group.
This is the third acquisition Nexus have exchanged on or completed in the past month, following the purchase of Equinox Global last week and Vectura Underwriting at the end of June. These acquisitions cement Nexus’s position as a multi-product, multi-class, multi-geographic ‘virtual’ insurance company.“
Daniel Topping, B.P. Marsh’s Chief Investment Officer and the Company’s nominee director on the Board of Nexus commented; “B.P. Marsh is pleased to see this round of M&A activity concluded, having provided the Loan Facility, alongside HPS Capital Partners, for these acquisitions to take place. From a revenue and profitability standpoint these acquisitions should prove to be transformational and we look forward to integrating them into Nexus’s existing business”.
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