Sirius could look to its managing general underwriting (MGU) partners as it seeks further acquisitions in the wake of a $2.2bn deal that will see the (re)insurer once again become a listed company.
In an agreement announced yesterday, Chinese-owned Sirius revealed a reverse-merger into a US firm Easterly – which describes itself as a “blank check” company - to increase its deal-making prowess.
In a call explaining the rationale for the merger, Sirius chairman and CEO Allan Waters said his firm could look to a number of the MGUs that currently write on the Bermudian’s paper for part of the acquisition growth the (re)insurer is targeting.
“We now have eight North American managing general underwriters writing on Sirius paper,” Waters said.
“Each of these MGUs has its own captive to take back some of the underwriting risk and profits to their own account,” he explained.
He said Sirius even had its own cell company that could act as a captive on behalf of those MGUs.
“This business is very sticky, it’s a real pain for MGUs to change paper,” Waters went on, adding: “It’s also very profitable as the producers are totally aligned with us on the bottom line, as opposed to top-line growth.”
“These MGUs are also a source of potential future acquisitions,” he said, pointing to two deals Sirius completed last year, when it acquired travel underwriter International Medical Group and and accident and health MGU ArmadaGlobal.
“We’re most successful in M&A when there’s a bespoke situation,” Waters said suggesting that Sirius had performed well in the case of a former forced fire-sale.
He said Sirius would also look to new lines for growth.
“Right now, due to M&A activity, there’s more talent in the marketplace than I’ve ever seen in my entire career,” Waters said, adding: “We anticipate adding more new lines in the future.”
“Also note, all of our lines except property draw small capital charges because they are diversifying risks.
“Growth on non-property lines generate handsome returns on capital for us.”