The race to buy Brit: the runners and riders

The race is on to buy Brit UK, with expectations that it could cost up to £150m to buy its regional business.
Brit’s UK regional book was worth a meaty £441.2m gross written premium last year, meaning that it will be a considerable business to digest for the eventual buyer.

Here, Insurance Times looks at the touted runners and riders in the race to acquire Brit’s UK book.

AGEAS

Ageas revealed last year that it had ambitions to expand its commercial insurance book by 30%. Although it would require a considerable level of integration into a largely personal lines insurer, Brit would add a healthy dose of diversity into the Ageas mix.

Ageas Insurance Ltd managing director Mark Cliff is a seasoned wheeler-dealer in commercial, who would probably expand and enhance Brit’s standing among brokers.

Cliff was previously AXA managing director with responsibility for distribution, so he has the experience to handle a larger premium book

However, the Ageas board may be reluctant to back such a big purchase in the middle of the eurozone crisis. Peripheral sovereign debt exposure – Italy, Ireland, Greece, Spain and Portugal – makes up 65.5% of shareholders’ equity. The big hitters on the Ageas board may decide that capital preservation is the order of the day.
 

COVEA

The French mutual giant has shown that it has very deep pockets, having recently purchased MMA, Swinton and Provident in recent years. Covea is also a big beast, with €13bn (£11.2bn) in premium, so it has the capacity to integrate large companies.

The question for Covea is whether Brit would sit well together with its UK commercial subsidiary MMA, which operates in a similar UK commercial space. Covea could decide to merge the two business together, to create a formidable UK commercial player.

Covea is certainly a front runner, having shown real determination to expand in the UK through acquisitions. The insurer also has no shortage of ambition: it currently has a team of 20 people working on a £20m launch of a new price comparison site.
 

QBE

QBE has previously talked big about becoming a top-five player in UK property, and acquiring Brit would certainly boost its market share. Brit’s UK regional book was worth £441.2m gross written premium last year. It historically has written around half of its UK business in property and commercial combined. By that logic, an acquisition by QBE would boost its UK regional property book by at least £200m gross written premium.

UK property head Ash Bathia would almost certainly play a key role in harnessing the full benefits of a newly-acquired Brit UK business. QBE has shown great belief in Bathia, promoting him to a wider role last year, overseeing UK property.

QBE Insurance Europe Ltd (QIEL) wrote just under half of its £1.28bn premium last year in the UK and notched up a combined operating ratio of 106%. A merger with Brit’s UK business, which posted a 99.8% combined operating ratio, may bolster the combined operating ratio performance of QIEL over the long term.

Unlike its peers, Australian-based QBE is laregly untouched by the eurozone sovereign debt crisis. It has the firepower to make a move. A drawback for QBE is that it may run up against an equally determined giant in Covea, and the French outfit has shown a Man City like spending mentality of persistance when it sets its sights on a target.

The propsect of being dragged into a bidding war with Covea, over what is essentially a commercial book dogged in a soft UK market, may cause even QBE to step back. As always, price will be the key factor.

 
CANOPIUS

Canopius chief executive Michael Watson has shown a cool and clever head in taking over a struggling business, turning a £1m-profit business into a £50m profit in just six years.

Watson’s strategy has been to snap up under-valued businesses, such as KGM, and polish them up into profitable outfits. Canopius also lures quality staff into its business with its lucrative incentives structure. It helps fuel organic growth.

However, Watson may well baulk at having to fork out £150m to compete in the ferociously competitive UK motor market through Brit’s regional offices, which are spread out across all areas of the UK.
 
RYAN SPECIALITY GROUP

Pat Ryan, fresh from securing admission into Lloyd’s by buying Jubilee, may want to complement Jubilee’s syndicates 5820 and 779 and Amsterdam-based European insurance operation with an FSA regulated entity, such as Brit Insurance Ltd.

However, there is some question about whether he would have stomach for a fresh acquisition so soon after completing the Jubilee deal.