Online insurer 123.ie sold to UK giant Royal Sun Alliance for €65m
Published 29/07/2010 | 05:00
IRELAND's first online insurance broker 123.ie has agreed to sell itself to UK giant Royal Sun Alliance (RSA) in a deal worth more than €65m.
Companies Office records show 123.ie founder Derek Richardson looks set to make more than €35m from the sale, while managing director Andrew Collins looks set to clear €20m.
The deal was announced yesterday and comes 10 years after 123.ie launched on to an internet-shy market in the summer of 2000.
Costly advertising campaigns helped the online brokerage build up a policyholder count of 170,000 as some €60m of premiums were sold in the year to March.
The bulk of those premiums were under-written by the Irish office of US giant Travelers Insurance under a special discount agreement.
Under the new deal, RSA will take over underwriting of all future policies sold by 123.ie and will be able to offer rates to 123.ie's existing book of policyholders on renewal.
RSA is also taking on 123.ie's branding, online infrastructure and physical offices, as well as the broker's 150 staff and management team.
In a statement, RSA said the "consideration" of €65m being paid included 123.ie's gross assets of €20m, implying a value €45m for the core business.
It is understood that further earn-outs may kick in depending on the future performance of 123.ie. The latest publicly available figures for 123.ie show pre-tax profits of €68,000 for the 15 months ended March 2009.
"The price looks a bit high to me," one industry observer said yesterday, though others pointed to the efficiencies RSA could achieve.
RSA said it would become "the second largest general insurer in Ireland" once the deal was completed, but industry sources questioned this assertion.
"RSA aren't buying an insurance company so they aren't buying any policies," said one, adding that RSA would have to price very keenly to secure renewals from 123.ie's book.
Analysis by the Irish Independent showed RSA's pricing is significantly ahead of 123.ie's on some lines.
RSA Ireland's market director Pat Nally yesterday declined to be drawn on whether 123.ie would offer significantly
cheaper prices than RSA currently offers through brokers.
"We have a very strong growth ambition for 123.ie," he said, stressing that RSA's business is "based on achieving profitable growth".
Mr Nally said that the deal would not mean any job losses at either 123.ie or RSA.
A spokesman for Travelers declined to comment on the job implications of losing the 123.ie business. Sources stressed, however, that Travelers also does substantial broker business in Ireland.
The deal marks a significant windfall for Dublin insurance broker Derek Richardson, who founded 123.ie back in 2000 and now acts as chairman.
Companies' Office records show Mr Richardson, who lists an address in Monaco, owns about 65pc of 123.ie, while managing director Mr Collins owns about 30pc. Collins was represented by Raglan Capital.
The remainder is split between a Santry-based Geoff Boyle, a Cyprus registered company called Applebear and the Gibraltar-domiciled 123 Money Ltd.
The acquisition marks RSA's fourth in four years. The insurer was also mooted as a potential buyer for Quinn Insurance.
Insurance sources suggested the 123.ie purchase effectively ruled RSA out of the Quinn race, but Mr Nally declined to be drawn on that point.