Underwriter to expand UK business through diversification and acquisitions
Lloyd’s underwriter Canopius has secured an investment of more than £100m to expand the business after the company posted pre-tax profits of £33m – up 27% year on year.
Canopius, which recorded an 89% increase in gross written premiums to £455m last year while it expanded into Ireland, Bermuda and Singapore, outlined plans to expand its business through diversification and acquisitions.
The strategy will be driven by a £60m cash injection from its principal shareholder, Englefield. Canopius chairman Michael Watson said the negotiations surrounding Englefield’s fourth and largest investment in the group concluded at the end of last month.
The funds will primarily be used to develop overseas operations and to close its acquired Syndicate, 839. Watson said a substantial war chest remained that would be used to pursue targets in the UK, mostly outside Lloyd’s.
He said: “In the current market there are only limited opportunities for organic growth. While prices for brokers are inflated, prices for insurers, including at Lloyd’s, have declined in recent months.”
Canopius has also secured a credit line of £50m to invest in its Syndicate 4444. The company’s financial resources, including debt and equity, now stand at more than £300m.
Watson added: “What many companies lack is access to capital. When you have excess capital, you become a welcome partner.”
Despite increasing its Syndicate’s capacity by 50% last year following the purchase of rival Creechurch, Canopius has reduced its capacity from £450m to £410m in recognition of deteriorating market conditions.
Canopius will continue to underwrite about four fifths of the Syndicate’s business. Syndicate 4444 has written almost two-thirds of its business plan for the year; rates haven fallen by about 2%.
Watson added that he was delighted with the performance of start-up commercial underwriting agency, Arista, in which Canopius has a 55% stake. In the year to date, Arista has almost eclipsed the £13m in premium it wrote in total last year.
Watson would not be drawn on the company’s profit estimates for 2008.