Monday 22 January 2018

Bank of Ireland's Watsa snaps up insurer for €1.6bn

Financier Prem Watsa
Financier Prem Watsa

Euan Rocha, Supriya Kurane and Richa Naidu

Bank of Ireland's biggest private sector shareholder has snapped up Lloyd's of London insurer Brit Plc for €1.6bn.

The deal will see Fairfax Financial Holdings, the Canadian property and casualty insurer run by contrarian investor Prem Watsa become one of the top five underwriters on the Lloyd's of London market.

Mr Watsa is a devotee of the value investing style favoured by Warren Buffett, and made billions for Fairfax by correctly calling the 2008 financial crisis - including by buying into Bank of Ireland shares in 2011 alongside a group of US based investors including Wilbur Ross.

While Mr Ross sold out of Bank of Ireland at a profit last year, Mr Watsa has maintained a stake in the Irish bank. He has also been growing Fairfax's presence elsewhere in Europe and recently announced deals to acquire much of QBE Insurance Group's asset base in Eastern Europe.

The Brit deal comes a month after Ireland-based XL Group snapped up another Lloyd's of London player - Catlin Group - for €3.6bn, and is the latest in a string of European insurance mergers as the region's underwriters face tighter capital rules.

Analysts expect the consolidation activity to continue with Lancashire Holdings, Amlin Plc and Novae Group, all seen as potential targets.

Brit shareholders will receive 305p per share in cash, comprising 280p in cash and an expected dividend of 25p per Brit share for the year ended December 31. Brit shares jumped more than 10pc to 303p, their highest since going public last year, on the London Stock Exchange yesterday.

This was slightly below the offer price at a premium of 11.2pc to Brit's closing price on February 16.

Fairfax has received irrevocable undertakings to accept the offer from entities managed by Apollo Global and CVC Capital Partners, which together own about 73pc of Brit.

"Brit had only recently returned to the stock market and had not yet built real traction, so this represents an easy exit for its major shareholder," said Westhouse Securities analyst Joanna Parsons, in a note. Apollo and CVC, which acquired Brit in 2010, took it public last year, valuing it up to £960m.

Toronto-based Fairfax said Brit's growing global reach would complement its existing operations and allow it to diversify its risk portfolio.

Brit underwrites a range of speciality policies from energy and marine to insurance for horses and the launch of spacecraft.

The acquisition is accretive to Fairfax on several metrics, including gross revenue per share and investments per share, it said in a statement.

Fairfax bought Brit's runoff business in 2012. In a runoff, a firm stops writing new business and only manages the existing book until all the policies in that book expire.

Irish Independent

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