Investee Company Update – XPT Group LLC

by B.P. Marsh | Apr 23, 2020 | Portfolio News

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”.

Trading Update

by B.P. Marsh | Feb 5, 2020 | Portfolio News

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.

Interim Results to 31st July 2019

by B.P. Marsh | Oct 15, 2019 | Portfolio News

B.P. Marsh & Partners Plc, the specialist investor in financial services intermediary businesses, announces its unaudited Group interim results for the six months to 31 July 2019 (the “Period”).

The financial highlights for the Period are:

• Net Asset Value (“NAV”) at 31 July 2019 of £130.0m (31 July 2018 restated*: £120.0m; 31 January 2019 restated*: £126.2m)
• NAV per share of 361p(31 July 2018: 333p; 31 January 2019: 350p)
• 4.0% increase in the equity value of the portfolio in the Period
• Profit after tax of £5.6m
• Final dividend of 4.76p per share for the year to 31 January 2019 declared and paid in July 2019
• Cash balance of £1.4m as at 31 July 2019
• Loan facility of £3.0m available to use for investment

The key developments for the Period are:

• LEBC Holdings Limited valuation impacted by withdrawal from Defined Benefit transfer market. Management actions are underway
• XPT Group LLC, based in New York City, completed a fourth acquisition in the Period and, post Period-end, successfully raised $40.0m in aggregate in funding and acquired its fifth business
• Nexus Underwriting Management Limited secured an additional £16.0m in new loan facilities and completed the acquisitions of a specialist Trade Credit Broker and a London-based Financial and Professional Lines Managing General Agency
• New investment in Ag Guard PTY Limited of Sydney, Australia

Brian Marsh, B.P. Marsh Chairman, commented,

“B.P. Marsh has continued its long track record of delivering NAV growth from its diverse portfolio of investments, despite specific challenges. As a leading specialist investor in global financial services intermediaries and with 50% of our investment portfolio revenues emanating from outside of the UK, the outlook for the rest of the financial year is positive.”

Analyst Briefing

An analyst presentation, hosted by the Company, will be held on Tuesday 15 October 2019 at 10:00 a.m. at the offices of B.P. Marsh & Partners Plc, 4 Matthew Parker Street, SW1H 9NP.

Please contact Adam Lloyd at Newgate Communications on 020 3655 6880 or [email protected] if you wish to attend.

Note: This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

*  Please note that these Interim results reflect the adoption of IFRS 16: Leases, which has had the impact of increasing the Group’s assets by £1.4m and increasing the Group’s liabilities by £1.5m through the recognition of a right-of-use asset and an associated lease liability in relation to the Group’s operating lease on its office premises. There has been negligible overall impact on the Group’s Net Asset Value, however the prior period comparatives have had to be restated accordingly.

Chairman’s Statement

I am pleased to present the unaudited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the six-month period to 31 July 2019.

On 2 September 2019, LEBC Group Limited voluntarily ceased the provision of Defined Benefit pension transfer advice pursuant to a market-wide review by the FCA. As a consequence of this, the Group has reduced the valuation of its holding in LEBC to £23.9m. However due to strong performance elsewhere within the portfolio, the Group is still aiming to conclude the year in a satisfactory position in terms of Net Asset Value. Our Net Asset Value as at 31 July 2019 was £130.0m or 361p per share, up 3% over the Period, notwithstanding the revaluation of LEBC.

During the Period, our partners in New York City, XPT, acquired Klein & Costa Insurance Services, a Managing General Agency and surplus lines broker located in California. XPT continues to have a promising pipeline of new investment opportunities, and we look forward to supporting its growth.

Nexus has continued with its successful acquisition strategy over the Period. In April 2019, it acquired Credit & Business Finance Limited, a specialist trade credit broker, and Capital Risks MGA Limited, a Warranty and Indemnity Managing General Agency. Nexus is now the leading independent UK trade credit broker. Most recently, in July 2019, Nexus acquired Plus Risk Limited, a London based Financial and Professional Lines Managing General Agency.

We were very pleased to complete a new acquisition over the Period. In July 2019, the Group subscribed for a 36% equity stake in Ag Guard Pty Limited (“Ag Guard”), which provides insurance solutions for the Australian agriculture sector, with insurance capacity provided by Munich Re.

The Group’s Australian investments continue to perform well, with ATC being a star performer, achieving significant EBITDA growth.

Walsingham has seen strong growth throughout the Period, with its results exceeding expectations.

The Group has experienced a healthy flow of new investment opportunities, with 42 received over the Period, compared to 32 received over the period to 31 July 2018. We continue to look at a number of domestic and international opportunities.

Currently, 50% of our investee companies’ revenue emanates from the UK, and 50% emanates from overseas.

Since incorporation, we have achieved an average annual compound growth in Net Asset Value of 11.7%, excluding any new funds raised.

Cash Balance

At 31 July 2019 the Group’s cash balance was £1.4m. During the Period, the Group entered into a £3.0m loan facility, provided by Brian Marsh Enterprises Limited, a company in which the Chairman, Brian Marsh, is a director and sole shareholder.

The loan facility provides the Group with further investment funds at an interest rate of the higher of either 4% or the UK 1-month LIBOR plus 3.25%, which are available to be drawn down until July 2020.

The Board considers that these are commercially advantageous terms, compared to other avenues of funding available. 

Business Update

Summary of Developments in the Portfolio

New Investments

Ag Guard PTY Limited (“Ag Guard”)

On 12 July 2019 the Group invested in Ag Guard, based in Sydney Australia.

The Group subscribed for a 36% equity stake in Agri Services Company PTY Limited, which in turn acquired 100% of Ag Guard, for an initial cash consideration of AU$1.47m (c.£823,000). Further consideration of up to AU$1.13m (c.£628,000) may become payable, subject to performance. 

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.      

It is expected that the Group’s investment in Ag Guard, with the backing of a strong and experienced management team, will enable Ag Guard to become a serious market player over the next five years.

Portfolio news

UK

LEBC Group Limited (“LEBC”)

The Group notes its recent announcement regarding its investee company LEBC Holdings Limited released on 2 September 2019, in which it holds a 59.3% shareholding. LEBC Holdings Limited is the parent company of LEBC Group Limited, the UK IFA business.

Pursuant to the FCA’s market-wide review of the defined benefit (“DB”) transfer market, LEBC agreed to voluntarily cease the provision of DB pension transfer advice and projects, with effect from 2 September 2019.

Advice in the DB transfer market represents c.20% of LEBC’s total revenue in its current year. As such, the cessation of the provision of advice in this area has impacted LEBC as can be seen by the Group’s reduction in valuation of its equity of LEBC to £23.9m.  However, LEBC, excluding DB transfer business, is still expected to produce annual revenue of c. £19.0m alongside an acceptable underlying profit position.

In line with its successful long-term investment strategy, the Group will continue to support LEBC as it evolves its business, which provides a range of financial solutions, for the benefit of its customers, staff and shareholders. LEBC has implemented a significant restructuring and is working on a number of initiatives, some of which have already been implemented, including its bionic advice offering. The Group will work closely with LEBC’s management team to return LEBC to the position it was in before the withdrawal from the DB market, and have recently assisted in the recruitment of a new Chairman to the holding company Board.

Since the Company invested in LEBC in April 2007, the current valuation represents a 1.9x money multiple.

Nexus Underwriting Management Limited (“Nexus”)

In April 2019 the Group provided Nexus with a £2m revolving credit facility, as part of Nexus’ wider debt fundraising exercise in order to undertake M&A activity, bringing the total loan funding from the Company to £6.0m.

In addition to the facility from the Company, Nexus secured an additional £14.0m loan facility from funds managed by HPS Investment Partners, LLC (“HPS”), a leading global investment firm.

The funding provided by both B.P. Marsh and HPS has resulted in Nexus securing a total of £46.0m of loan funding, including the £30.0m of loan funding secured from both B.P. Marsh and HPS in July 2017.

Nexus is forecasting an adjusted EBITDA of c.£20m over the next 12 months, which would represent a compound annual increase in EBITDA of 45% since B.P. Marsh’s investment in August 2014.

During the Period, Nexus completed 3 acquisitions; Credit & Business Finance Limited (“CBF”), a specialist trade credit broker, Capital Risks MGA Limited (“Capital Risks”), a Warranty and Indemnity MGA, and Plus Risk Limited (“PBL”), a Financial and Professional Lines MGA.

Following the acquisition of CBF, Nexus became the leading independent UK trade credit broker, fulfilling one of its strategic goals as well as uniting the two biggest producers of ‘new to market’ business.

As part of the acquisitions, key management from the new acquisitions became shareholders in Nexus. The new acquisitions have increased Nexus’ forecast revenue by £2.83m and EBITDA by £1.39m. The Group recognises the recent growth in Nexus, which has been reflected in the Company’s valuation for its holding in Nexus increasing from £30.12m to £40.3m.

Nexus were pleased to announce the appointment of Andrew Moss, as non-executive Chairman. Andrew spent five years as Group CEO of Aviva Plc, and prior to this he held senior positions within Lloyd’s of London. He was most recently Chairman of Parker Fitzgerald, a London Based management consultancy firm, where he helped steer their recent acquisition by Accenture to its successful outcome.

The Company welcomed this appointment pursuant to Nexus’ avowed goal of achieving £20m of annualized EBITDA by the 2020 financial year, which will well position it as the pre-eminent London Market specialty MGA and strategically manoeuvre Nexus to review its next stage of development.

CBC UK Limited (“CBC”)

CBC, the London-based Lloyd’s broking business has increased its EBITDA by 40% in 2018, and is on target for increasing at the same rate in 2019.

CBC continues to strengthen its product offering with strategic hires and has recently hired an experienced Financial Products team. During the Period, the Group provided a £0.5m loan to support CBC in these endeavours.

The Fiducia MGA Company Limited (“Fiducia”)

In November 2016, the Group invested in Fiducia, a UK Marine Cargo Underwriting Agency, established by CEO Gerry Sheehy, based in Leeds.

Fiducia is a registered Lloyd’s Coverholder which specialises in the provision of insurance solutions across a number of Marine risks including Cargo, Transit Liability, Engineering and Terrorism Insurance.

During the Period, the Group invested £0.12m in Fiducia, being its pro-rata share of a £0.35m fundraising, with the remainder being provided by its CEO and founder, Gerry Sheehy.

Since Fiducia commenced trading, it has grown from a start-up position to producing in excess of estimated £10m forecast Net Written Premium in the year ending 31 December 2019, across its specialist lines of business.

EC3 Brokers Limited (“EC3”)

In December 2017, the Group invested in EC3, an independent specialist Lloyd’s broker and reinsurance broker.

Since investment, EC3 is expected to grow its top line revenue from c. £9m to a budgeted target of approaching £14m in the year to 31December 2019, whilst also maintaining a good underlying profit margin.

Over the same period, B.P. Marsh has worked with EC3 to augment its management function, and further develop its product offering to deliver both top and bottom-line growth.

Walsingham Motor Insurance Limited (“Walsingham”)

Walsingham, the London-based motor fleet MGA, continued its strong progress in 2018 reporting £19.8m in premium and generating EBITDA for the year of £0.6m. 2019 has seen further steady growth, reporting £21.5m in premium in 10 months’ trading with EBITDA expected to be c.60% ahead of 2018.

USA

XPT Group LLC (“XPT”)

The Group invested into XPT, the U.S. based specialty lines insurance distribution company, in June 2017.

In July 2019, XPT acquired Klein & Costa Insurance Services (“Klein & Costa”), an MGA and surplus lines broker located in Santa Ana, California.

Established in 2001, Klein & Costa provides broking services in the areas of Professional Liability and Speciality Lines, and as an MGA it represents three carriers with broad delegated underwriting authority.

Following the acquisition, Klein & Costa became part of Western Security Surplus Insurance Brokers (“WSSIB”), XPT’s wholesaler and MGA based in Texas and California, and began trading under the WSSIB name. This acquisition provided WSSIB with entry into a new location and introductions to Klein & Costa’s retail producers.

Since XPT commenced trading, it has grown from start-up to $165.0m in Gross Written Premium and is approaching $3.9m of adjusted EBITDA in its current financial year ending 31 December 2019.

Following the Period-end, XPT successfully secured $40m, in aggregate, of funding from Madison Capital Funding LLC (“Madison Capital”). As part of the transaction, Madison Capital took an equity interest in XPT Group LLC.

XPT has secured loan funding of $18.0m to refinance its current debt facility, and an additional $22.0m to support future growth. The financing with Madison Capital provides XPT with an opportunity to enter the next phase of its development and continue to seek strategic acquisitions in the North American insurance market.

As part of the fund raising, Madison Capital invested $2.0m and took an equity holding in XPT which values XPT at an enterprise value of $54.0m. This is approximately 10% greater than the Group’s 31 July 2019 valuation.

In tandem with the fundraising, XPT completed the acquisition of Sierra Specialty Insurance Services, Inc (“Sierra”). Sierra is an MGA and wholesale broker based in Fresno, California, and specialises in the provision of insurance to independent retail agents. Sierra represents XPT’s fifth acquisition of an established business.

Australia

ATC Insurance Solutions (PTY) Limited

Sterling Insurance (PTY) Limited

MB Prestige Holdings (PTY) Limited

Ag Guard (PTY) Limited

B.P. Marsh’s existing investments in Australia continue to perform well in a challenging insurance market, with premium income and profitability increasing across the board.

This is in response to a more positive insurance market internationally, and it also underlines the intrinsic quality of these companies and their management teams.   

Additionally, the Group was pleased to note that all of the Company’s Australian MGAs successfully renewed their underwriting capacity support with Lloyd’s and the international insurance markets.

ATC Insurance Solutions (PTY) Limited (“ATC”) saw strong growth throughout the Period, reporting a significant increase of Gross Written Premium from AUD 61.0m in 2018 to AUD 84.0m in 2019.

The Company’s newest investment, Ag Guard, is a start-up which will no doubt face initial challenges, however we believe that the management team we have backed, with our investment support and underwriting support from Munich Re, has a strong growth horizon looking to the future. 

Canada

Stewart Specialty Risk Underwriting Ltd (“SSRU”)

SSRU, the Toronto-based provider of specialty insurance products to a wide array of clients in the Construction, Manufacturing, Onshore Energy, Public Entity and Transportation sectors, commenced operations in February 2017.

Since the Group’s investment, SSRU has grown its Gross Written Premium from nil to a forecast position of over CA$9.0m in the year ending 31 December 2019, and achieving a profit and dividend yield.

Europe

Summa Insurance Brokerage, S.L. (“Summa”)

Summa is a regional consolidator of insurance brokers with 16 branches across Spain. 

Whilst the Spanish insurance market continues to be a challenging place in which to operate, Summa continues to deliver c. €45.0m of annual premium and an annual adjusted EBITDA of over €1.2m.

The Group is also pleased to note that Summa has recently achieved Lloyd’s Coverholder status, which will bolster its product offering going forward. 

Dividend

In July 2019 the Group paid a dividend of £1.7m to shareholders, equating to a dividend per share of 4.76p. The Board continues to strike a balance between investing cash into new opportunities for long-term capital growth and providing shareholders with a yield. This was the final dividend from an agreed three-year distribution following the successful realisation of Besso in February 2017. The Board is committed to paying further dividends funded by the proceeds of future portfolio realisations.

Share Buy-Backs

The Group has a share buy-back policy, as announced on 17 July 2019, that enables it to buy back shares when the Company’s share price is more than 15% below the Company’s most recently published Net Asset Value, within the permitted constraints of the Market Abuse Regulation.

The Board remains of the view that the authority to undertake low volume buy-backs of shares, when regulatory restrictions allow, is an important stabilising mechanism in times of market or share price volatility. During the Period, the buy-backs were conducted with the backdrop of market turbulence and the Board believes that these transactions had a stabilising effect on the Company’s share price.

During the six-month period to 31 July 2019 a number of buy-backs were undertaken, amounting to 51,416 shares, at an average price of £2.81 per share, which are being held in Treasury.

Directorate Changes

On 23 August 2019, the Group announced that Camilla Kenyon would be resigning her position as Executive Director, with effect from 31 August 2019.

Millie had worked with the Company since 2006. The Board is grateful for her contribution as an Executive Director since 2011.

As part of Millie’s departure from the Group, an internal restructuring process was undertaken with her role being divided amongst the existing Management Team. The Investor Relations function will sit with the Chairman, Managing Director and Company Secretary, and New Business responsibilities will be assumed by the Investment Department.   

On 2ⁿ October 2019, the Group announced that Campbell Scoones, aged 72, resigned as a Non-Executive Director of the Company. Campbell also resigned from his role on the Remuneration Committee. The Nominations Committee will be considering candidates for Campbell’s replacement.

Business Strategy

The Group invests amounts of up to £5m in the first round of funding and takes minority equity positions in financial services intermediaries, normally acquiring between 20% and 40% of an investee company’s total equity. During the holding period, additional investment can lead to the Group having a majority holding, as is the case currently in LEBC and Summa. In these circumstances, day to day business operation remains with management, with the Group providing input, advice and assistance, as with all of its portfolio businesses.

The Group makes long-term investments with an average holding period post-float of 6.4 years, with our current portfolio being held on average for approximately 4.3 years. As ever, we do not invest in companies that accept Insurance Underwriting risk.

The Group requires its investee companies to adopt minority shareholder protections and to appoint a nominee director to its board.

Since 1990 the Group has generated an average NAV annual compound growth rate of 11.7% (excluding the £10.1m proceeds raised on flotation and £16.6m proceeds raised as part of the Placing & Open Offer completed in July 2018). Its successful track record can be attributed to a number of factors that include a robust investment process, management’s considerable sector experience and a flexible approach to exit.

Outlook and New Business Opportunities

In addition to making the investment in Ag Guard during the Period to 31 July 2019, the Group continues to look at a number of MGAs and Insurance Brokers both domestically and internationally, alongside several interesting opportunities outside the insurance space.

36% of enquiries received by the Company emanated internationally, and 64% of enquires received by the Company were domestic.

The Group has produced a satisfactory overall performance in the Period. The Group’s strategy is to generate long-term value and the Board is confident in the Group’s ability to do so, notwithstanding short-term market uncertainties.

Brian Marsh OBE, Chairman

14 October 2019

Investee Company Update – XPT Group LLC

by B.P. Marsh | Sep 16, 2019 | Portfolio News

B.P. Marsh & Partners Plc the specialist investor in early stage financial services businesses, is pleased to announce that XPT Group LLC (“XPT”), the U.S. based specialty lines insurance distribution company, has successfully completed a fund-raising exercise and complementary acquisition.

Fundraising

XPT has secured $40million in aggregate financing from Madison Capital Funding LLC (“Madison”).

Madison, founded in 2001, is a market leader in providing middle market companies with debt solutions. Since inception Madison has invested  $34.4billion in 1,193 transactions with 305 different private equity sponsors. Madison is a leader in financing the insurance distribution segment.

As part of the transaction, Madison will take an equity interest in the business which values XPT at an enterprise valuation of circa $54m.

The financing provides XPT with an opportunity to make further acquisitions and enter the next phase of its growth. Upon completion with Madison, XPT will draw down $18m. This draw down will be to finance the acquisition detailed below and to repay an existing debt facility.

A further $22m finance facility is in place to support growth.

Acquisition

Simultaneously to the completion of the fundraising, XPT have acquired 100% of Sierra Specialty Insurance Services Inc. (“Sierra”). Sierra is an MGA and wholesale broker based in Fresno, California, and specialises in the provision of insurance to independent retail agents.

Sierra is led by President, Kathy Schroeder together with COO, Mark Schroeder. Both Mark and Kathy Schroeder have many decades of experience in underwriting, broking and management. Kathy has also served on the American Association of Managing General Agents Board, one of the two predecessors to Wholesale Specialty Insurance Association (WSIA). Both Kathy and Mark Schroeder will remain at Sierra post acquisition.

Following the investment by Madison in XPT and the acquisition of Sierra by XPT, B. P. Marsh will have a revised shareholding of 32.2% in XPT.

XPT continues to explore additional M&A opportunities in the U.S. that complement and enhance XPT’s product and distribution offering.

XPT’s Chief Executive Officer Thomas Ruggieri has stated that “XPT is fortunate to have quickly assembled a Partnership nucleus of expert specialists in Specialty Distribution financially backed by the two most experienced financers supporting Insurance Distribution in BP Marsh and Madison Capital Funding. We look forward to continuing our industry leading organic growth by supporting our partners with new product, resources and customer service to attract the brightest client focused producers to our partnership.” He also noted “Kathy and Mark’s leadership in the industry and in central California will greatly enhance our partnership. Sierra Specialty reinforces XPT’s collaboration as they will partner in our existing product segments in general authority underwriting, transportation and hospitality, while moving us into agri-business.  

Commenting on the recent activity, the Group’s Chief Investment Officer and Nominee Director on XPT, Daniel Topping, said “The fundraising with Madison is a tremendous milestone in XPT’s development. Since XPT’s first investment in November 2017, XPT has grown to Gross Written Premium approaching $200m, inclusive of the Sierra acquisition. This is an outstanding achievement by the XPT team and we look forward to further supporting their growth.”

Trading Update

by B.P. Marsh | Sep 2, 2019 | Portfolio News

B.P. Marsh, the specialist investor in early stage financial services businesses, provides the market with an update on trading for the six months ended 31 July 2019.

B.P. Marsh had anticipated that it would make this Trading Update on 5 September 2019. However, in light of the Group’s recent share price performance and the announcement made regarding LEBC Holdings Limited the Group believed it was sensible and prudent to bring this trading update forward, to update shareholders on the performance of the Company as a whole and to provide further information regarding LEBC.

LEBC Holdings Limited (“LEBC”)

The Group notes its recent announcement regarding its investee company LEBC Holdings Limited, in which it holds a 59.3% shareholding. LEBC Holdings Limited is the parent company of LEBC Group Limited (“LEBC”) the UK IFA business.

As part of its market-wide review of the defined benefit (“DB”) transfer market, the FCA has undertaken a review of LEBC focused on the division of the business that provides DB pension transfer advice.

Following this, LEBC has agreed voluntarily to cease the provision of DB pension transfer advice and projects, forthwith.

Advice in the DB transfer market represents c.20% of LEBC’s total revenue in the current year. The cessation of the provision of advice in this area will have an impact on LEBC. However, LEBC, excluding DB transfer business, is expecting to produce annual revenue of c. £19m with the business still reporting an acceptable underlying profit position.

In line with its successful long-term investment strategy, B.P. Marsh will continue to support LEBC as it evolves its business, which provides a range of financial solutions, for the benefit of its customers, staff and shareholders. As reported this morning, LEBC is working on a number of initiatives, some of which have already been implemented. The Group will work closely with LEBC’s management team to return LEBC to the position it was in before the FCA review.

Although the current situation will reduce LEBC’s valuation in the short term, B.P. Marsh has a diverse portfolio. The strong performance delivered by a number of its investee companies in recent months, as outlined below, means that the Board believes that the Company will emerge in a satisfactory position under the circumstances as regards its financial results for the six months ended 31 July 2019. As at the last published valuation (being 31 January 2019, released on 11 June 2019), the Group valued its 59.3% stake in LEBC at £35.5m.

Net Asset Value and Interim Results

The latest published Net Asset Value (“NAV”) is £126.2m, or 350p per share, as at 31 January 2019. The NAV per share is calculated based upon the total shares in issue of 37,478,077, and then excluding 1,461,302 shares held in a management incentive scheme as these shares are subject to performance criteria which have not yet been met and are non-dilutive at this time.

Although the current situation will reduce LEBC’s valuation in the short term, B.P. Marsh has a diverse portfolio and the strong performance delivered by a number of its investee companies in recent months means that the Board believes that the Company will emerge in a satisfactory position under the circumstances as regards its financial results for the six months ended 31 July 2019.

The interim results to 31 July 2019 and the updated NAV will be announced on Tuesday 15 October 2019.

Cash Balance

At 31 July 2019 the Group’s cash balance was £1.4m. In light of this, the Board explored short, medium and long term funding options to improve the cash balances of the Company, in order to take advantage of any new investment opportunities.

Having reviewed all the options available to the Group, and given the market wide volatility, the Group entered into a £3m loan facility, provided by Brian Marsh Enterprises Limited, a company in which the Chairman, Brian Marsh, is a director and sole shareholder.

The loan facility provides the Group with further investment cash at an interest rate of the higher of 4% or the UK 1-month LIBOR plus 3.25% and is available to be drawn down until July 2020.

The Board considers that these are commercially advantageous terms, compared to other avenues of funding available.

Follow-on Investments and Funding
Nexus Underwriting Management Ltd (“Nexus”)

EC3 Brokers Limited (“EC3”)

In December 2017, the Group invested in EC3, an independent specialist Lloyd’s broker and reinsurance broker.

Since investment, EC3 has grown its top line revenue from c. £9m to a budget of approaching £14m in the year to 30 December 2019, whilst also maintaining a good underlying profit margin.

Over the same period, B.P. Marsh has worked with EC3 to augment its management function, and further develop its product offering to deliver top and bottom-line growth.

The Fiducia MGA Company Limited

In November 2016, the Group invested in a UK Marine Cargo Underwriting Agency, established by CEO Gerry Sheehy and based in Leeds.

Fiducia is a registered Lloyd’s Coverholder which specialises in the provision of insurance solutions across a number of Marine risks including, Cargo, Transit Liability, Engineering and Terrorism Insurance

Since Fiducia commenced trading, it has grown from a start-up position to producing in excess of £10m in Gross Written Premium in the year ending 31 December 2019, across its specialist lines of business.

Walsingham Motor Insurance Ltd (“Walsingham”)

Walsingham, the London-based motor fleet MGA, continued its strong progress in 2018 reporting £19.8m in premium and generating EBITDA for the year of £0.6m. 2019 has seen further strong growth, reporting £21.5m in premium in 10 months’ trading and EBITDA expected to be significantly ahead of 2018.

Canada
Stewart Specialty Risk Underwriting Ltd (“SSRU”)

SSRU, the Toronto based provider of specialty insurance products to a wide array of clients in the

Construction, Manufacturing, Onshore Energy, Public Entity and Transportation sectors, commenced operations in February 2017.

Since the Group’s investment, SSRU has increased its Gross Written Premium from nil to a forecasted position of over CA$9m, in the year ending 31 December 2019, whilst also producing profit and dividend yield.

Spain
Summa Insurance Brokerage, S. L. (“Summa”)
Summa is a regional consolidator of insurance brokers in Spain, with 19 branches across Spain.

USA

XPT Group LLC (“XPT”)

Whilst the Spanish insurance market continues to be a challenging place in which to operate, Summa continues to deliver c. €45m of annual premium and an annual adjusted EBITDA of over €1.2m.

The Group was also pleased to note that Summa had achieved Lloyd’s coverholder status, which will bolster its product offering going forward.

The Group invested into XPT in June 2017, the U.S. based specialty lines insurance distribution company.

In July 2019, XPT’ acquired Klein & Costa Insurance Services (“Klein & Costa”), an MGA and surplus lines broker located in Santa Ana, California.

Established in 2001, Klein & Costa provides broking services in the areas of Professional Liability and Speciality Lines, and as an MGA it represents three carriers with broad delegated underwriting authority.

Following the acquisition, Klein & Costa became part of WSSIB, XPT’s wholesaler and MGA based in Texas and California, and began trading under the WSSIB name and provided WSSIB with entry into a new location and introductions to Klein & Costa’s retail producers.

Australia

B.P. Marsh’s existing investments in Australia [ATC Insurance Solutions PTY Limited, Sterling Insurance PTY Limited and, MB Prestige Holdings PTY Limited] continue to perform well in an insurance market which although challenging from a performance perspective, has presented these companies with growth opportunities. As such premium income and profitability has increased across the board.

On the one hand this is in response to a more positive insurance market internationally, but it also underlines the intrinsic quality of these companies and their management teams.

Additionally, the Group was pleased to note that all of the Company’s Australian MGAs were able to renew their underwriting capacity support with Lloyd’s and the international insurance markets.

As regards the Company’s newest investment, Ag Guard PTY Limited , although a start-up, which will no doubt face initial challenges, we believe that the management team we have backed, with our investment support and underwriting support from Munich Re, has a strong growth horizon looking to the future.

New Investment
Ag Guard PTY Limited (“Ag Guard”)

Dividend

In July 2019 the Group paid a dividend of £1.714m to shareholders, equating to a dividend per share of 4.76p.

Directorate Change

On 23 August 2019, the Group announced that Camilla Kenyon will be resigning her position as Executive Director, with effect from 31 August 2019.

Millie has worked with the Company since 2006. The Board is grateful for her contribution as an Executive Director since 2011.

As part of Millie’s departure from the Group, an internal restructuring process was undertaken, with her role being divided amongst the existing Management Team. The Investor Relations function will sit with the Chairman and Managing Director, and New Business will be assumed by the Investment Department.

New Business Opportunities and Outlook

In addition to making the investment in Ag Guard during the Period to 31 July 2019, the Group continues to look at a number of MGAs and Brokers both domestically and internationally, alongside a number of interesting opportunities outside the insurance space.

Investee Company Update – Nexus Underwriting Management Limited

by B.P. Marsh | Jul 30, 2019 | Portfolio News

B.P. Marsh & Partners Plc, the specialist investor in early stage financial services businesses, is pleased to note that its investee company Nexus Underwriting Management Limited (“Nexus”), in which it holds an aggregate shareholding of 18.5%, has announced that it has acquired Plus Risk Limited (“PRL”), a London based Financial and Professional Lines MGA.

PRL provides Management Liability and niche Professional Indemnity Insurance. PRL was founded in 2017 and its underwriting team is comprised of James Rasmussen and Neil Ede, who will continue in the business post transaction. James Rasmussen and Neil Ede will become shareholders in Nexus and move to Nexus’ London headquarters.

James Rasmussen has over 19 years’ of FinPro broking and underwriting experience, including previous roles at Travelers and Chubb. Neil Ede has over 20 years’ experience in the industry, including 7 years at Chubb and 10 years at AIG.

Since BP Marsh’s investment in Nexus in 2014, Nexus’ Gross Written Premium has grown from £50m to an expected Gross Written Premium of £313m for the year ending 31^st December 2019.

Daniel Topping, B.P. Marsh’s Chief Investment Officer commented: “PRL is a natural adjunct to Nexus’ FinPro product offering. The acquisition of PRL is another pleasing example of Nexus’ buy and build strategy, representing the 14^th transaction Nexus has undertaken since our investment in 2014.”

Colin Thompson, Nexus Founder and Group CEO has commented: “This is a strategic acquisition for Nexus and a natural addition to our existing capabilities. We are acquiring PRL at an exciting stage in its development and will look to accelerate growth through our infrastructure, distribution channels and networks.”