Dan Topping, chief investment officer, BP Mash
BP Marsh interested in finding people who need ‘the right home’.
BP Marsh & Partners “weathered the storm” last year to report good growth in asset and its equity values, despite the pandemic. The specialist investor with significant stakes in several brokers even added to its insurance portfolio, with a 30 percent investment in Oregan, US-based Sage Program Underwriters.
That’s despite significant challenges for some of its businesses. Its biggest investment is Nexus Underwriting Management, the largest independent specialty managing general agent (MGA), which is heavily involved in aviation and travel underwriting. Yet even it continued to grow and add two further acquisitions, including Hiscox’s MGA marine business.
To discuss its resilience and BP Marsh’s plans for the future, chief investment officer Daniel Topping joined the Re/Insurance Lounge, Intelligent Insurer’s digital hub for interviews, debates and panel discussions.
“You wouldn’t know it from the reporting, but insurers stepped in and provided the coverage to allow PPE to move freely throughout the UK.” Dan Topping, BP Marsh
According to Topping, the results—a 9.5 percent increase in its net asset value and almost 11 percent increase in the equity value—showed the portfolio’s resilience and were strong “given the context”.
“It certainly strikes me that commercial insurance has become much more of a non-discretionary spend than people perhaps realise,” he said.
That “context” remains challenging, he admitted. At Nexus Underwriting, aviation and travel usually account for around 20 percent of its gross written premium of £380 to £400 million a year.
“That effectively closed down when lockdown started,” Topping said. Another of its investments is Lloyd’s broker EC3. About a third of its business is usually from event cancellation and contingency covers but instead, much of its work over the last 12 to 15 months has been handling claims.
Even these businesses have come through relatively unscathed. Fourteen out of Nexus’s 18 units hit or beat their budgets in 2020 to leave earnings before interest, taxes, depreciation, and amortisation flat. It also hired several teams, made a couple of acquisitions and announced a partnership with leading US-based national property and casualty insurer Crum & Foster.
EC3 Brokers, meanwhile, maintained and even added to its client base, with wins including the London Marathon and the Great North Run.
There were opportunities for others in BP Marsh’s portfolio. US-based Sage Program Underwriters, in which it took a 30 percent stake in June 2020, saw good business from worker’s compensation insurance for the ground delivery sector amid the massive rise in online purchasing. Leeds-based marine MGA The Fiducia, meanwhile, helped to provide cover for the transport of personal protective equipment (PPE) across the country.
“You wouldn’t know it from the reporting, but insurers stepped in and provided the coverage to allow PPE to move freely throughout the UK and get to the right place at the right time,” remarked Topping.
“Now is a good time to be investing in insurance intermediaries, because that’s what we do.”
Opportunities persist this year. The business already has a strong portfolio of startups, including Sage and specialist marine Lloyd’s broker, Lilley Plummer Risks, founded in October 2019 and profitable from its first year.
Recent events and market developments are likely to mean more opportunities in the future.
For a start, the market does seem to be hardening, according to Topping. “We are just about old enough to have experienced the last truly hard market. Certainly, there’s a sense that it feels similar to that,” he said.
That, however, isn’t what really interests him.
“We’re in it for the long haul, and I don’t think people would be attracted to us if we brought a proposition to invest for 12 to 24 months to take advantage of price increases and then look to get out while valuation multiples were high.”
The firm is a growth investor. As Topping put it: “We’re farmers, not hunters.”
However, the business also is focused on investing in people, and the current market dislocation could mean an increase in those looking for a new home.
“We’ve been in the market making investments for 25 years, and I’d always say now is a good time to be investing in insurance intermediaries, because that’s what we do. But there does seem to be such activity at the bigger end of the market that it is driving an increasing number of interesting opportunities to look at,” said Topping.
That doesn’t mean it will rush out to do five or 10 startups in the coming year, but it could mean it can offer “options” in a fast-changing market.
“If you want to set up on your own, we’ve got the capital, expertise and experience,” he said.
“What we continue to see is that we provide optionality to people who through no fault of their own have found that they’re not in the right home.”
To view the full Re/insurance Lounge session click here.
BP Marsh & Partners, Investment, Insurance, Reinsurance, Daniel Topping, North America