Re Brokers Benfield Group, Towers Perrin Re Unveil Strategies

International Editor

London

Two reinsurance brokers are following new strategic paths, following recent announcements that Benfield Group Limited is planning an initial public offering, while Towers Perrin has acquired Denis M. Clayton & Co. Limited.

Benfield is planning a public listing on the London Stock Exchange in the first half of 2003 in order to raise more capital to create additional financial flexibility, Grahame Chilton, chief executive officer of Benfield Group, told National Underwriter.

As a private company, Benfield has been able to grow its customer base and product range substantially, Mr. Chilton said.

Access to capital markets, he said, will provide the flexibility to maintain and improve its competitive position in the reinsurance marketplace.

“We want access to capital. Im not sure, actually, [that] we need it, but we want immediate access to it,” he said.

In May 2001, Benfield acquired E.W. Blanch Holdings Inc., a U.S.-based reinsurance intermediary in a debt-financed transaction, the company said in a statement. “Since that time, net debt levels have been significantly reduced by the issue of 40 million ($62 million) of convertible preference shares and positive cash generation from excellent trading conditions,” the company said. “This has enabled the group to repay, on or ahead of schedule, more than 65 million ($100 million) of bank debt in the current year.”

Benfields board “believes that it is now an appropriate time to raise further capital by means of a public listing,” the companys statement continued.

The group redomiciled to Bermuda from London in October to give the board of Benfield the choice of considering an initial public offering in the United States or in the United Kingdom, the company stated.

“Whilst the group can meet the necessary [regulatory] requirements in either jurisdiction, the board considers that the rapidly moving regulatory environment in the United States, with its inevitable cost implications, is not attractive for a public listing of the groups shares at this time,” the company added.

Mr. Chilton emphasized that this doesnt mean that Benfield will rule out a listing in the United States when the current market uncertainties have settled.

Despite rumors several months ago that Benfield and Marsh were in discussions, Mr. Chilton said: “We never entered into any due diligence discussions with any other broker.”

He said the IPO announcement has been well received by clients and markets alike because it removes “any ill-founded speculation” about the company.

Further, he continued, Benfield team members are happy about the announcement because it states clearly “our intent to remain independent.”

Meanwhile, in a separate development, Towers Perrin Reinsurance, the Philadelphia-based reinsurance intermediary and consultancy, has acquired Denis M. Clayton & Co. Ltd., a London-based insurance and reinsurance intermediary and consultancy.

“This transaction will merge Claytons with Towers Perrin Reinsurance, creating a global reinsurance intermediary that will have over $120 million in revenue, placing more than $3 billion of reinsurance premiums into the marketplace,” according to a Towers Perrin statement.

“As we evaluated our market presence and strategic alternatives, it became apparent that in order to continue to grow within a consolidating reinsurance industry, we needed a strong partner and London presence,” said William Eyre, managing director and chief executive officer of TP Re, in a company statement.

“Both of us found we had a real alignment of interests,” said John Goldsmith, chairman of Claytons.

Both companies fit well together culturally, he said, noting that they are both independent brokers, privately held, employee owned, and they have done business together for many years.

Not only does the merger provide Claytons with enhanced business opportunities in the United States, but it secures for TP Re “a platform for growth in the London and European markets,” he told National Underwriter.

Mr. Goldsmith emphasized that the conception that bigger is better with regards to brokers was not the motivation behind the merger.

“Its still very much a people business,” he said. “I think its important to have quality people and people who are creative and professional and have good relationships in the market, so you can get things done,” he said. “But size isnt the only thing.”

Claytons, which was founded in 1972, specializes in three business sectors:

North American and Canadian reinsurance business developed directly and through correspondent intermediary relationships;

North American and Canadian insurance business developed through managing general agents and wholesale brokers;

U.K. reinsurance business developed through Lloyds underwriters and London market companies.

Mr. Goldsmith said the news of the merger has been well received by the market and clients.

Benfield Group

executive

says rumors

about deal

with Marsh

were unfounded

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Special Reports /

Re Brokers Benfield Group, Towers Perrin Re Unveil Strategies

Related Stories

Recommended For You