MGA chiefs plan to capitalise on ‘period of commonsense underwriting’ to expand their firms’ distribution, using ‘the resources of the Gallagher group to support us’

Following its acquisition by Gallagher-owned MGA Pen Underwriting in October 2021, Manchester Underwriting Management (Mum) plans to take advantage of the insurance market’s current “period of commonsense underwriting” to leverage “additional distribution opportunities” and grow its business “with the resources of the Gallagher group to support us”, according to Charles Manchester, chief executive of Mum.

Speaking exclusively to Insurance Times, Manchester revealed that M&A negotiations with Pen Underwriting kicked off about nine months ago, when he came “to the conclusion that it was time to move on and become part of a bigger group”.

He continued: “It very quickly became apparent that Pen and Gallagher would be very complementary. We have very little overlap in terms of distribution and product, so we fit well.

“We’ve both got similar cultures of focusing on underwriting profit, which is the basic thing an MGA has to deliver – [which some MGAs may have forgotten about in previous soft markets].

“There was a good fit and you can’t ask for a much bigger, better parent than Gallagher.”

Manchester was also quick to emphasise, however, that in the short to medium-term, “Mum is going to remain as an independent operating business within Pen”, meaning that it is “business as usual” with the same Mum brand and staff.

This includes Manchester retaining his role at the helm of the eponymous MGA. Shooting down any suspicions around retirement, Manchester said: “My position prior to the deal was chief executive of Manchester Underwriting and my position post-deal is chief executive of Manchester Underwriting.

“I’m certainly not going anywhere and the other people you know and love at Mum are also not going anywhere.”

Broadening distribution and expertise

In terms of corporate strategy, Manchester said the crux of the deal with Pen Underwriting lies in expanding both businesses’ distribution.

He explained: “I don’t think Mum’s looking to increase the breadth of the lines of business that it writes. The insurance market as a whole is going through a period of commonsense underwriting, so it’s no longer in a race to the bottom price wise.

“Insurers have rediscovered that they need to make an underwriting profit and that’s great because it enables good quality underwriting outfits to grow.

“What the Pen deal brings to Mum is a different distribution. There will be additional distribution opportunities for Mum and likewise, Mum brings its distributions to Pen and Gallagher.

“We’re going to have a slightly broader distribution and market conditions in our favour to take advantage of those with the resources of the Gallagher group to support us.”

Alongside these distribution advantages, Pen Underwriting chief executive Tom Downey also hopes to benefit from the “great people, great leadership [and] great technical ability” that Mum offers.

Noting that Mum “really stood out” from the MGA crowd, Downey continued: “Charles brings a real market presence and a deep understanding of the MGA sector and the whole [insurance] market.

“Charles and the team will add very extensive depth to the Pen leadership, [while] the non-leadership team will be really complementary and help us build and grow what we want to achieve. The team will be excellent and I know Pen will be grateful for the Manchester Underwriting team.”

This focus on people formed an important part of early discussions around the acquisition too, Downey added.

“When Charles and I first started talking, it wasn’t long before we started talking about people and what people bring to an organisation and that’s something that really stood out for me as part of the conversation when we first started talking,” he said.

‘Open for talking’

Despite the ink barely being dry on Pen’s purchase of Mum, Downey told Insurance Times that the MGA is very much “open for business and open for talking” when it comes to finding future M&A opportunities.

For him, M&A is a key component of Pen Underwriting’s five-year business strategy. Announced last year, this plan outlines the MGA’s ambition to become “a £1bn underwriting distribution business” over the five-year time frame.

“We made it abundantly clear that M&A would play an important part in our plans for accelerated growth,” Downey added.

“Obviously our parent, in its own DNA, is focused on successful M&A opportunities and we at Pen are actively looking for successful, high quality, like-minded, well run underwriting businesses that extend our existing capabilities for both our brokers and their clients. We continue to do that. M&A is part of it.”

Another facet of the strategy lies in “bringing new people to Pen to write new products”, Downey noted.

This so far includes former Liberty Speciality Markets staffer Neil Bowdrey joining the MGA in May 2021 in the newly created role of head of directors and officers (D&O).

Similarly, ex-Hiscox employee Tom Dixon was appointed in September 2021 as head of technology, another newly created position.

Downey continued: “It’s always about mutuality of relationships, mutuality of understanding and being able to work together. So, hopefully there’s other MGAs that want to come to Pen.”