MGA was unable to deliver the same level of returns that the core broking business did, Brightside chief executive tells Insurance Times
Brightside-owned MGA Kitsune is to be put into run-off, just shy of its two-year birthday, it was announced today.
Brightside chief executive Brendan McCafferty told Insurance Times that the decision was “regrettable but entirely rational”.
”We could have confidently broked capacity beyond the end of the existing binder, but the issue was can we do that economically enough to attract enough volume to make the kind of contribution that we originally hoped the business would produce,” he said.
Kitsune was launched in early 2019 after several delays and catered to private car and commercial business.
In August last year, private-equity owned Brightside placed its medical reporting business IQED into run-off as part of an 18-month strategy to focus on its core broking business.
”Our concentration on niche and specialist segments is paying off. That strategy we articulated two years ago continues to pay dividends. Kitsune was unable to compete with the investment opportunities we have as a business now,” McCafferty added.
At the time the strategy was announced, Kitsune remained part of the group’s future plans, but the MGA failed to deliver the returns demanded by the company’s investors.
Kitsune was unable to deliver rapid returns in the current market conditions, which are very different from the ones anticipated when Kitsune was launched, McCafferty said.
He said it was a decision about “investment priority”.
Kitsune sits alongside the broking business, which has delivered ”magnificent growth”, the chief executive said.
”The market is challenging. There’s lots of claims inflation around which is not being offset by rate rises, despite the prospect of that being around the corner all the time. It never quite seems to happen.
”We had to make that difficult decision about what to invest in.
”We’ve reached the point where we’ve needed to do this.”
The run-off will be conducted in a ”measured and careful” way, McCafferty said. Wholesale brokers affected have been spoken to and he said Brightside would do everything to make sure customers’ interests are protected during the run-off.
”As a [chief executive] and as a board of directors, we have to deal with the reality that we can’t do everything. Strategy is what you decide not to do. We needed to prioritise our attention and our financial resources and our cash on the more attractive investments.”