Cincinnati Financial CorporationCINF recently closed the previously announced (Oct 12, 2018) buyout of MSP Underwriting Limited, a reputed global specialty underwriter and a unit of Munich Re. Cincinnati Financial stands to benefit from MSP Underwriting's experienced underwriting team while lending a boost to its business lines.
The company agreed to acquire MSP Underwriting for a cash consideration of £102 million ($135.5 million), based on the latter's projected net asset value on wrapping up the transaction. Being a wholly owned subsidiary of the acquirer, MSP Underwriting will be functioning under its own brand and with the existing leadership team.
London-based MSP Underwriting operates through Beaufort Underwriting Agency Limited that also underwrites for Lloyd's Syndicate 318. In 2018, the Syndicate successfully wrote nearly £182 million ($241.8 million) annual gross written premiums. Given its status of an experienced property and aviation underwriter, MSP Underwriting boasts delivering underwriting profit in 20 of the last 25 years.
The acquisition will not only boost underwriting discipline but also lend support to the agents in new lines of business as well as geographies. With an agent-centric business model, the transaction is expected to prove beneficial for the acquirer as it will aid in fueling long-term premium growth. Further, the addition of MSP Underwriting will augment the acquirer's present large commercial account, excess and surplus lines, high net worth personal lines and reinsurance assumed growth initiatives. Cincinnati Financial estimates this buyout to be accretive to 2019 net income.
With this acquisition, MSP Underwriting is expected to grow on the back of Cincinnati Financial's platform, which in turn, will help improve its business. With the culmination of the buyout, Munich Re will have a much more focused and simpler set-up that will enable it to drive profitable growth within the Lloyd's market.
MSP Underwriting's business size and strength will assist the property and casualty (P&C) insurer to continue with its proven strategy of developing successful insurance businesses over a considerable period of time.
Shares of the Zacks Rank #1 (Strong Buy) insurer have rallied 12.1% year to date, outperforming the S&P 500 index's rise of 11.1%. We expect premium growth, strategic initiatives and a healthy capital position to push the shares up in the near term.
Other Insurers Following Suit
Considering the insurance industry's high available capital, there has been a host of significant acquisitions in the space of late.
Recently, Beecher Carlson Insurance Services, LLC, a subsidiary of Brown & Brown, Inc. BRO , has purchased certain assets of Donald P. Pipino Company. The transaction will not only enable the insurance broker to enhance its service portfolio but also provide a wide range of resources and extended service plus consulting capabilities to its clients.
In January 2019, Arthur J. Gallagher & Co. AJG entered into a definitive agreement wherein it will acquire 100% of specialist UK insurance broker Stackhouse Poland Group Limited. The transaction will enable the acquirer to boost its service portfolio while continuing to bolster client service. Also, Horace Mann Educators Corporation HMN closed the buyout of retirement plan provider Benefit Consultants Group and the subsidiary broker dealer and registered investment adviser BCG Securities (announced on Oct 30, 2018). The acquisition will help the Multi line insurer improve its retirement plan offerings for educators and others, providing services to their communities.
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