Final Results for the Year to 31 January 2020

Final Results for the Year to 31st January 2020

B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early stage financial services businesses, announces its audited Group final results for the year to 31 January 2020.

Highlights:

  • Net Asset Value increased by £10.7m to £136.9m (31 January 2019: £126.2m), an 8.5% increase, net of Dividend
  • Net Asset Value per share increased by 29.8p to 380.1p (31 January 2019: 350.3p)
  • Total Shareholder return of 9.8% for the year including the Dividend paid in July 2019
  • Net Asset Value average annual compound growth rate of 8.5% during the year, compares to an average of 8.1% per annum since flotation and 11.8% since 1990 (net of Dividends and the cash proceeds of Placings)
  • Consolidated profit after tax of £12.5m (31 January 2019 restated: £12.4m). This constitutes an increase of 3.4% excluding one-off items of £0.4m
  • Two new investments; Agri Services Company PTY Limited in Sydney and Lilley Plummer Risks Limited in London
  • Dividend of 2.22p per share payable in July 2020 (2019: 4.76p)

Commenting on the results, Brian Marsh OBE, Chairman, said: “The Group is pleased to have continued to produce a good overall performance throughout the year despite the various challenges we faced.”

For more information, please see https://otp.investis.com/clients/uk/bp_marsh1/rns/regulatory-story.aspx?cid=736&newsid=1395618

Investee Company Update – XPT Group LLC

B.P. Marsh & Partners Plc is pleased to announce that investee company XPT Group LLC (“XPT”), the U.S. based specialty lines insurance distribution company, has successfully completed an acquisition.

XPT has acquired 100% of LP Risk, Inc (“LP Risk”) , the Houston, Texas, headquartered Managing General Agency (“MGA”) and surplus lines Broker, (the “Transaction”). LP Risk also has offices in Dallas and San Antonio (Texas). Founded in 1991 as MD Jensvold & Company, LP Risk was acquired in 2013 by Mr Landon Parnell and rebranded to LP Risk in January 2018.

XPT will be utilising its previously announced debt facility with Madison Capital Funding LLC to acquire LP Risk. As part of the Transaction, Landon Parnell will become a shareholder of XPT, with an approximate 6% shareholding, forming part of the purchase price. Following the acquisition, B.P. Marsh will have a revised shareholding of 29.9% in XPT. 

LP Risk specialises in transportation, hospitality, contractors, marine, energy/oil & gas and manufacturing. With 51 employees, it handles over 4,000 accounts a year on behalf of 350 retail agents and brokers in 18 States. Following the Transaction, Landon Parnell will remain with the business as the President of LP Risk and will become a member of XPT’s Executive Committee. 

It is expected that this acquisition will bolster XPT’s foothold within its existing markets and add an experienced professional to XPT’s Executive Committee. The Transaction furthers XPT’s strategy to develop a high-class specialty distribution platform across the US by acquiring niche, profitable businesses.

B. P. Marsh was a founding investor in XPT in 2017, since when it has grown significantly through value accretive acquisitions using its partnership approach. From a standing start, XPT is forecasting Gross Written Premium in excess of $300m and EBITDA of approximately $7m inclusive of this acquisition to December 2020. It has operations across the United States, with a strong presence on the West and East coast and a strengthened footprint in the Midwest now, following its first acquisition of Western Security Surplus Insurance Brokers, LLC in November 2017.

Commenting on the recent activity, the Group’s Chief Investment Officer and Nominee Director on the Board of XPT, Daniel Topping, said “LP Risk is a tremendous addition to XPT. Landon Parnell has developed a first-rate speciality insurance business which will further bolster XPT’s position. It is a testament to what Tom Ruggieri and his team have achieved so far, that they have been able attract Landon Parnell and his business. We at B. P. Marsh look forward to continuing to work with XPT to help them achieve all their targets.”

On the latest acquisition XPT’s Chief Executive Officer Thomas Ruggieri stated that “Landon brings with him an impressive track record of success and knowledge that will strengthen our executive committee. We are thrilled to have him and his team join the XPT family”. 

Landon Parnell, who will remain as President of LP Risk and will take on a new role of leading XPT’s National Property and Casualty Brokerage Division, said “LP Risk has spent many years developing the technical knowledge of our underwriters and the market relationships of our brokers, while making service our main priority. XPT’s commitment to launch innovative products while using a modern platform to access new markets will allow us to raise our service level and realize lasting growth”.

Investee Company Update – Stewart Specialty Risk Underwriting Limited

B.P. Marsh, the specialist investor in early stage financial services businesses, is pleased to provide an update on its Canadian Investment, Stewart Specialty Risk Underwriting Limited (“SSRU”).

SSRU is the provider of specialty insurance products to a wide array of clients with severe exposures in the Construction, Manufacturing, Natural Resources, Public Entity and Transportation sectors. SSRU commenced operations in February 2017.

For the year ended 31 December 2019, SSRU wrote Gross Written Premium of CA$10.8m and is primed to enter its next stage of growth.

Part of this growth has seen SSRU establish a new Property Department, which went live in December 2019. SSRU have capacity of CA$15m and now provide a variety of primary and excess Property products tailored to individual clients in the Natural Resources, Complex Commercial and Construction segments. 

As part of this new offering, SSRU has announced the appointment of Heather Jamieson as Vice President of SSRU’s Property division. Having worked in the Insurance industry for more than a decade, Heather joins SSRU to head their new Property division.  Her experience includes positions of increasing responsibility at Allianz and Zurich in Canada where she specialised in Mining, Power Generation and Oil & Gas business. 

SSRU have also made a number of other senior appointments for the next phase of its growth.  Peter Lee has been appointed as Vice President of Casualty, joining SSRU with over 25 years’ experience, having spent most of his career dealing with complex commercial casualty business as both an underwriter and a broker, most notably with ACE INA Insurance and Northbridge Insurance. SSRU have also promoted Victor Ip, to be Senior Vice President of Casualty. Victor has been with SSRU since formation and has been a central part of SSRU’s past and on-going success.  Georgiana Pasca has also been promoted to Chief Financial Officer, having been with SSRU since formation. She has played a key role in ensuring stability as the company grows through the development and implementation of financial and operational processes and controls.  Georgiana holds a master’s degree in international finance and a CRM designation.

Commenting on this development, SSRU’s President and CEO Stephen Stewart stated:

“The appointment of Heather Jamieson, alongside the establishment of a new Property facility, strengthens and develops SSRU’s capabilities at an important time in SSRU’s development.

The business has grown steadily since formation and it has always been our intention to substantially develop SSRU, alongside our investment partners, B.P. Marsh, over the next five years.  The appointment and promotions form a central part of our growth plans.” 

Commenting on the Canadian insurance market, Stephen Stewart added:

The Canadian insurance market differs in many respects from its American counterpart. While its economy is closely integrated with that of the United States, the Canadian legal climate is very different, providing for much lower indemnity judgments with a virtual absence of punitive and general damage awards.  This produces a less volatile and more consistently profitable result for Casualty lines. 

“The Canadian Property insurance environment is markedly less exposed to natural catastrophe than its American neighbour and the market is currently experiencing severe rate hardening.  This hardening is contributing to a much-needed correction to its premium base.  Climate change will undoubtedly create a greater frequency and severity of natural catastrophe exposure in both the USA and Canada.

“With less relative exposure, increasing rates and a favourable regulatory environment, the Canadian market is well positioned to face these challenges and provide stability for future renewal cycles.”

Daniel Topping, Chief Investment Officer of the Group commented:

“Since SSRU commenced writing business in February 2017, SSRU has grown to Gross Written Premium of over CA$10m. This is an excellent achievement by the SSRU team and we look forward to further supporting their growth over the coming years.”

Brian Marsh, Chairman of the Group commented:

“Our backing of Stephen Stewart and his colleagues at SSRU demonstrates both our long term investment approach and our ability to identify and support outstanding management teams.  Stephen and his team members deserve congratulations and thanks from B.P. Marsh for this very sturdy performance.”

Investee Company Update – Nexus Underwriting Management Limited

B.P. Marsh & Partners Plc is pleased to note that its investee company Nexus Underwriting Management Limited (“Nexus”), has been ranked at number 78 in The Sunday Times International Track 200 league table, which ranks Britain’s 200 mid-market private companies in order of fastest growing international sales.

This is a prestigious group of fast growing companies across all sectors of UK business. Nexus has eight overseas offices across Europe, America and Asia. Nexus increased its international sales to £7.6m for its year ended 31st December 2018, a significant increase from £3.2m for their year ended 31st December 2016.

The Group holds an aggregate Nexus shareholding of 17.7% and has been invested since August 2014. Nexus is one of the largest independently owned Managing General Agencies in the UK insurance market, budgeting to write over £345m of Gross Written Premium across various specialty lines in the 2020 financial year.

Dan Topping, B.P. Marsh’s Chief Investment Officer and Nominee Director on the Board of Nexus has said: “B.P. Marsh is pleased to note this accolade for Nexus, which is a testimony to Nexus’ ability to deliver strong growth in international sales and expand their global footprint.”

Trading Update

B.P. Marsh & Partners Plc
(“B.P. Marsh”, the “Company” or the “Group”)

Trading Update

B.P. Marsh, the specialist investor in early stage financial services businesses, is pleased to provide the following unaudited trading update for the Group’s year ended 31 January 2020.

Highlights

  • The completion of two new investments; Agri Services Company PTY Limited in Sydney and Lilley Plummer Risks Limited in London
  • £2m follow-on funding to Nexus Underwriting Management Limited, as part of its wider £16m fundraising exercise
  • Loan Facility of US$2m to XPT Group LLC, based in New York City, which also completed a successful US$40m refinancing exercise with Madison Capital Funding LLC
  • The Group secured access to a £3m loan facility with attractive terms
  • As at 31 January 2020, cash of £0.8m and available cash of £3.8m
  • The Company continues to maintain a diverse portfolio of investments, by sector, geography and currency, with 57% of the investment portfolio’s revenue originating from overseas

Net Asset Value

The latest published Net Asset Value (“NAV”) was £130m, or 360.9p per share, as at 31 July 2019, which represented a 3% increase, or a 4.3% increase including the dividend paid in July 2019, for the six months ended on that date. From its inception in 1990 until 31 July 2019 the Group has maintained an average annual compound increase in NAV of 11.7%. The Group is expected to report a positive performance for the financial year ended 31 January 2020.

The Company’s Annual Results for the full year to 31 January 2020 and an updated NAV will be announced on Tuesday 9 June 2020.

B.P. Marsh remains focussed on taking actions to reduce the differential between NAV per share and the current share price.

In the year ended 31 January 2020, as a sign of confidence in the Company, nine Directors and Senior Management of the Group purchased a net c.145,000 shares in the Company at market price. Chairman of the Group, Brian Marsh, gifted c.2% of his direct shareholding to the Marsh Christian Trust, a charitable trust he founded in 1981, as he does every year.

Cash Balance

At 31 January 2020 the Group had access to cash of £3.8m. This is inclusive of the undrawn £3m loan facility with Brian Marsh Enterprises Limited (“BME”). As at 31 January 2020, the Group was debt free.

In the financial year ending 31 January 2021, the Company is expected to receive over £2.5m in loan repayments from its investee companies, which will assist the Group to continue to pursue its core investment objectives.

As previously announced, during the year, the Company explored short, medium, and long-term funding options so that it could continue to take advantage of new investment opportunities as they are identified.

Having considered the available options, and taking account of market conditions and the performance of its portfolio, the Group entered into the £3m loan facility with BME, a company of which the Chairman of the Group, Brian Marsh, is a Director and sole Shareholder.

The loan facility provides the Group with access to further investment funds at an interest rate of the higher of 4% or the UK 1-month LIBOR plus 3.25% and is available until 29 July 2021.

The Group considered these to be attractive terms when compared to other avenues of funding.

New Investments

Ag Guard PTY Limited (“Ag Guard”)

In July 2019, the Group completed an investment into Ag Guard, based in Sydney Australia, a Managing General Agency specialising in Australian Agriculture Insurance. The Group acquired a 36% equity stake for up-front consideration of AU$1.47m (c.£0.8m), with further consideration of AU$1.13m (c.£0.6m) paid in January 2020. This transaction represented the Group’s fourth Australian investment.

Founders Alex Cohn (Managing Director), Martin Birch (Technical Director) and Ben Ko (Finance & Operations Director) have considerable experience in the provision of general insurance services in the Australian rural sector.   

Lilley Plummer Risks Limited (“LPR”)

In October 2019, the Group subscribed for a 30% equity stake in the London based, Lloyd’s Marine Broker LPR, the Group’s third Lloyd’s Broker in its current portfolio. The Group invested £1m by way of both redeemable and non-redeemable preference shares.

In the first three months of being operational, the founders, Stuart Lilley and Dan Plummer, have been extremely active in expanding the workforce and have more than doubled the number of employees working within the organisation. LPR have both strengthened their original marine operation and also hired new members of staff, which have enabled them to diversify into new product lines.

Mike Lilley joined from Chesterfield Insurance Brokers after 17 years of service, being appointed Chairman of LPR, and to open a Treaty Reinsurance department.

Mike Gooding will be joining LPR from Guy Carpenter after 12 years of service, to head up the Terrorism and Political Violence department.

Follow-on Investments and Funding

Nexus Underwriting Management Limited (“Nexus”)

Nexus is one of the largest independently owned Managing General Agency in the UK insurance market, budgeting to write over £345m of Gross Written Premium across various specialty lines in the 2020 financial year.

In March 2019, Nexus launched Xenia Broking Group Limited, a new entity which consolidated Nexus’ trade credit broking activities and will remain independent and segregated from Nexus’ underwriting operations. Nexus is now one of the leading independent UK trade credit brokers, having a c.10% market share of the c.£350m Gross Written Premium trade credit market.

In April 2019, the Group provided Nexus with a £2m revolving credit facility, as part of a wider £16m fundraising exercise, in order to undertake M&A activity.

Nexus has acquired Credit & Business Finance Limited, Capital Risks MGA Limited and Plus Risk Limited in the past year. These acquisitions demonstrate Nexus’ M&A strategy and the company continues to explore value accretive acquisition opportunities.

In September 2019 Nexus announced the appointment of Andrew Moss as independent Non-Executive Chairman on Nexus’ main board as part of its strategic growth plan. Andrew has had a long and distinguished career within the insurance industry including five years as Group CEO of Aviva Plc, and prior to this he spent four years as Director of Finance, Risk Management and Operations at Lloyd’s of London. In 2014 he joined Parker Fitzgerald, the London based Management Consultancy, as Chairman of the Advisory Board where he helped steer their recent acquisition by Accenture to its successful outcome.

In January 2020 Nexus Specialty Inc., part of their US platform, established a wide-ranging new programme agreement with A-rated Crum & Forster, that allows Nexus to underwrite their market leading trade credit products on a fully admitted basis in the US.

XPT Group LLC (“XPT”)

Since investment in 2017, XPT the specialty lines distribution company, has made numerous acquisitions, providing it with a footprint across the US with offices in North Carolina, Texas, California and New York. From a standing start in 2017, it is now forecasting annualised Gross Written Premium of US$260m for the 2020 year.

In April 2019, the Group provided XPT with a US$2m Loan Facility.

Later that year XPT successfully secured US $40m of aggregate funding from Madison Capital Funding LLC (“Madison”). As part of the transaction, Madison took an equity interest in the business which values XPT at an enterprise value of c.US$54m. Madison is backed by the financial strength and stability of New York Life Insurance Company and has $10.6 billion of assets under management, exclusively investing alongside private equity sponsors and other investors.

Portfolio Highlights

UK

CBC UK Limited (“CBC”)

CBC continues to deliver strong growth, with the year ending 31 December 2019 expected to report revenue of £7m and EBITDA of £1.7m. This result represents an increase of c.20% in revenue and c.50% in EBITDA over the year.

CBC have successfully established an International Division for professional lines, further expanding its product offering.

EC3 Brokers Limited (“EC3”)

Over the course of the year EC3 has made several new team hires, establishing both a North American Property Division and a Sports and Entertainment Division. This further diversified EC3’s product offering. The management team at EC3 continue to explore further value accretive hires and acquisitions.

In May 2019, James Murphy joined EC3 as Head of Broking having had many decades’ experience in the London Insurance Market, starting his career at Nelson Hurst & Marsh, then as part of the management team of a Lloyd’s broker that was subsequently acquired by Willis. Following on from this, EC3 expanded its UK Contingency & Entertainment division with three senior hires, helping it towards its goal of becoming the pre-eminent independent entertainment insurance broker in the London Market.

In August 2019, EC3 established a North American Property division, headed up by Matt and David Jeffery, with further hires thereafter. These two individuals have over three decades of combined experience in the London Market with senior roles at Jardine Lloyd Thompson, Cooper Gay and Besso.

Since investment in December 2017, EC3 has grown its top line revenue from c.£9m to a 2020 budget approaching £14m.

The Fiducia MGA Company Limited (“Fiducia”)

Fiducia, the UK Marine Cargo Underwriting Agency established in November 2016, has grown from a start-up position to Gross Written Premiums of £12m for the year ending 31 December 2019, across the Marine Specialty Insurance Sector.

In January 2020, Fiducia expanded their product offering with the establishment of a Fine Art and Specie division, headed up by James Bavin. James was previously head of Marine at Advent Capital. This new division is supported by underwriting capital from Lloyd’s of London to complement Fiducia’s existing product offering. 

LEBC Holdings Limited (“LEBC”)

On 2 September 2019 the Group announced that LEBC Group Ltd, a UK-based IFA and 100% owned subsidiary of LEBC, had agreed to voluntarily cease the provision of Defined Benefit transfer advice. This was pursuant to the FCA’s market-wide review of the Defined Benefit transfer market.

Advice in the Defined Benefit transfer market represented 15% of LEBC’s audited consolidated total revenue in its previous financial year, ended 30 September 2019. This impacted the Group’s valuation of its 59.3% equity interest in LEBC, which was reduced to £23.9m at its most recent valuation for the period ending 31 July 2019.

LEBC has implemented a significant restructuring and is working on a number of new initiatives.  In line with its successful long-term investment strategy, the Group continues to support LEBC. 

LEBC continues to offer a full range of private client and employee benefit advice and is focussed on growing the business in these areas and investing in technology and recruitment, to continue to meet a growing demand for advice from private individuals and companies.

Canada

Stewart Specialty Risk Underwriting Limited (“SSRU”)

SSRU, the Toronto based provider of specialty insurance products to the Construction, Manufacturing, Onshore Energy, Public Entity and Transportation sectors, has secured a new Property offering. SSRU has secured CA$15m of A-rated Canadian capacity to write primary and excess Property products, tailored to individual clients in the Natural Resources, Complex Commercial and Construction segments.

As part of this new product offering, SSRU has appointed Heather Jamieson as Vice President of SSRU’s Property division.

Australia: ATC Insurance Solutions PTY Limited (“ATC”), Sterling Insurance PTY Limited (“Sterling”) and MB Prestige Holdings (PTY) Limited (“MB”)

The Group’s established investments in Australia, ATC, Sterling and MB continue to perform well, with all three investments increasing their premium income and profitability in the year. This results in an aggregate combined budget of approaching AU$150m in premium income and AU$23m in commission income.

This performance, in a challenging insurance market, underpins the quality of these companies and their management teams.

In September 2019, ATC partnered with the Lloyd’s syndicate, Talbot Underwriting (an AIG company), to provide a bespoke insurance solution to the Australian SME sector. The Group welcomed ATC’s move into this fast-growing sector of the insurance market.

In December 2019, Sterling announced further expansion of its aviation division with the appointment of Greg Leeman, and partnership with Tokio Marine Kiln in bolstering its product offering in Aviation insurance.

Singapore

Asia Reinsurance Brokers PTE Limited (“ARB”)

In December 2019, ARB appointed William Pang as Managing Director, to oversee ARB’s business portfolio and the teams across ARB. William has 20 years of reinsurance experience, having worked for Munich Re, ACR and JLT Re in various underwriting, broking and senior management roles.

Additionally, in September 2019, Chiam Heng Lock was appointed a Director of Reinsurance. Chiam has a wealth of experience in this market, having previously worked at Willis Re, JLT Re, and worked with Copenhagen Re and Everest Re for many years.

New Business Opportunities

B.P. Marsh is well known in the sectors in which it specialises and the quantity of opportunities presented to the Group remains high.

B.P. Marsh has a wide array of industry specific contacts with whom the Group remains in regular contact, to drive germane and high quality deal flow.

The financial year closed with a total of 117 new opportunities having been presented to the Group during the year, in comparison with 64 in the previous year. Of the 117, the majority were in the insurance sector. The increase in opportunities over the past year underpins our unique investment approach, with the Group continuing to see significant deals in the Financial Services sector.

The Group is well positioned in its current financial year, with a strong pipeline of new opportunities, a number of which should develop over the course of the year.

The Group will remain disciplined in its approach to the investment process, focusing on niche SME businesses in sectors which the Group understands, with the aim of achieving considerable short and long term growth.

In addition to this, the Group’s investee companies continue to seek and undertake bolt-on acquisitions.