Posted on Sep 21, 2011 by Sergio Ulloa
Whittington Group, the Singapore-based international insurance investment conglomerate, announced today that it had reached a definitive agreement to sell off its British businesses to an international consortium of specialist insurers. The move follows similar actions taken by other players in the United Kingdom insurance market, as firms look to divest stagnant business lines to finance expansion in other parts of the world.
The announcement of a definitive sale agreement has ended a long-running evaluation process that had seen more than a dozen potential suitors assessed by Whittington Group over the past year. The consortium that was finally agreed upon by Whittington has been lead by London-based specialist insurer Tawa PLC, and also includes Norwegian marine insurer Skuld as well as Bermuda-domiciled insurance and reinsurance holding company Paraline Group PLC. The terms of the deal have not yet been disclosed, but are not thought to be far off Whittington's initial £37 million (US$60 million) appraisal of its businesses. The transaction is now pending the approval of Lloyd's and the UK Financial Services Authority (FSA) and would be expected to close before the end of 2011.
The deal will see the consortium acquire Whittington Insurance Markets Limited (WIM) and its UK subsidiaries, including Whittington Capital Management Limited, an important provider of turnkey managing agency services to new and existing syndicates at Lloyd's of London. Upon completion of the transaction, a new management team, led by current Whittington chief executive Stephen Cane, will become equity investors in the acquired company.
In a statement Cane welcomed his new business partners and heralded their investment as an important step in the further development of the company: "We are extremely pleased with the acquisition by the consortium and also with the opportunity to participate in the ownership of our company. Each of the partners will provide strength and stability to our business. With the support of our new ownership group, we will also now have the ability to provide capital to selected new entrants to Lloyd's."
The chief executive for Tawa, Gilles Erulin meanwhile described the acquisition of WIM as a coup. Having an established presence in Lloyd's turnkey system could prove to be an effective and cost efficient way to bolster their services in the company insurance market. "This transaction provides us with a platform through which to expand our range of services to the Lloyd's community. Whittington is the leading franchise in the Lloyd's agency management market and provides us with real scale as a provider of live insurance services. This is highly complementary with the range of consulting and outsourcing services currently provided through Pro, and we look forward to developing these businesses in tandem with one another," Mr. Erulin commented.
Turnkey syndicates are managed by third parties on behalf of capacity providers and are integral in providing cover for large companies as well as small and medium enterprises. Whittington currently manages six key syndicates at Lloyd's: WR Berkley, Channel Syndicate 1915, the Goldman Sachs-backed Arrow Syndicate, Sirius Syndicate 1945, and two recent transfers from Alterra Capital; Syndicates 2525 and 2526. The combined capacity of these syndicates totaled approximately £500 million (US$785 million) for the 2011 year of account. At the end of 2010 WIM's consolidated profits before tax were £4.6 million (US$ 7.2 million) with net assets worth £3.5 million (US$5.5 million).
The addition of Whittington's Lloyd's platforms has come during a busy period of acquisition for Tawa, which has seen it buy up run-off insurers like Oslo Reinsurance and Bermuda's Island Capital, as well as the £38 million purchase of Swiss Re's P&C legacy business Pro in 2009. Tawa, long focused on run-off management, has been looking to expand and diversify its services portfolio, targeting higher margins over increased volume, and becoming a more traditional insurance business with recurring and reliable revenue streams. The company has become a service provider with developed platforms in the United States, Europe and now the Lloyd's and company market in London.
For the Whittington Group, CEO Anthony Holbrow explained in a statement that the deal would enable their firm to focus on developing its core business in Asia. "Our group's focus has, for some time, been on developing our businesses in Asia and the sale of WIM in London will enable us to accelerate our ambitions in the region and focus our energies on the Asian insurance markets. This marks the end of 18 years in the London Market for Whittington Group and we thank our dedicated people and loyal clients for making WIM the attractive business that has it has become."
Whittington moved their headquarters to Singapore in 2006 and has been selling off their assorted turnkey operations to free up capital for further activity in the Asia Pacific region. The Group's largest project to date is a direct online motor business in Singapore called DirectAsia.com, which they purchased in June 2010. This growing internet business combined with a rising regional middle class and motor pool presents an opportunity for a higher rate of return on capital. The emerging insurance markets in Asia are now widely expected to outperform that of other more mature Western markets, with India and China leading the way
. Hobrow concludes that the Whittington Group is aware of this trend and is acting accordingly to shift their global focus and seize the opportunities a rising Asian middle class can provide. "There are plans to expand the DirectAsia.com brand into other markets in the region and the sale of our London business will certainly give our Asia operations an added impetus."
Insurance Companies Mentioned
The Whittington Group offers global capital and consultancy services to non-life insurance businesses, in the areas of start-up, growth, exit, outsource, run-off administration, and office accommodation and infrastructure. The company was founded in 2005 and is based in Singapore.
Tawa PLC specializes in acquiring and developing the run-off portfolios of insurance and reinsurance companies, as well as introducing its own products to serve the international insurance market. Tawa was founded in 2001 and is a United Kingdom-based company.